Monday, August 18, 2008

Managing Finances: Collaborative Divorce vs. Litigation

In a recent post in my other blog (Divorce and Family Law in Tarrant County, Texas), I wrote about an article that originally appeared in It was advice about how to manage your finances in a divorce. It was obviously written from the perspective of a litigated divorce instead of a Collaborative divorce. There were a few points that I would have explained a little differently, but the article overall was very helpful. Later, I looked at the article from a Collaborative perspective and it was amazing how different my comments would be. The following are the main points raised in the original post, with my comments and explanations showing the contrast between litigation and Collaborative Law.

1. Know what you have. Instead of figuring this out when the divorce is ending, in Collaborative cases we start exchanging information during the first or second meeting. In addition, we often bring in a neutral financial professional (FP) who helps both parties gain an understanding of the assets, liabilities and future needs for both parties. My experience is that the Collaborative parties generally end up with a much greater knowledge of their finances because it is so openly discussed and professional help is utilized.

2. Think about where you're going. Again, this is done at the outset and reviewed often during the Collaboration process. The parties usually start at the first joint meeting discussing and recording their respective goals. Throughout the process, they refer back to the goals to make sure they are still on track to accomplish their goals. That is almost never done in a litigated case. In litigation, the parties usually just stake out arbitrary positions and try to get to another arbitrary position. Rarely do the parties in litigation spend time developing their goals or targets and the strategies to accomplish them.

3. Keep track of your credit rating. Again, that's pretty good advice. In a Collaborative case, the parties fully disclose their finances from the beginning. If desired, either or both parties can obtain their credit records to review. And then they would share that information with their spouse.

4. Save something every month. That's good advice, once the divorce is over with. Most people going through a divorce will spend a while adjusting to a new financial situation. The most common challenge is how to support two households on the same income that was basically consumed supporting one home. Still, with a financial neutral helping the parties create a plan and a budget, the parties are in a pretty good position to start saving. In a litigated divorce, the parties are usually on their own and often lack the information, skills and motivation to start saving. Many parties in a Collaborative divorce make saving one of their important goals, so they discuss it and plan for it from the beginning.

5. Close all joint accounts. This is done by agreement at an appropriate time in a Collaborative divorce, after discussion among the parties and neutral financial expert.

6. Educate yourself about money. That certainly happens in a Collaborative divorce. It's often true that one party in a divorce knows more about the finances than the other party. In a Collaborative case, the process provides an education for the party who starts out with less knowledge. Besides having an attorney advisor, each party gets copies of all the financial records that are relevant and, in most cases in North Texas, a neutral financial professional is involved. The FP helps to educate the parties about what assets and liabilities there are and what opportunities are available. In litigation, the neutral FP is missing, so understanding the finances is often much more difficult.

7. Don't panic. Panic is usually not an issue in a Collaborative case. The parties work with specially trained attorneys, a neutral communication coach (usually a mental health professional) and a financial professional in a less stressful and more effective environment than is available in litigated divorces. On the other hand, it is understandable how parties might panic in a litigated divorce with its lack of support and highly stressful atmosphere. Setting goals, gathering and analyzing information and then making decisions with the aid of knowledgeable professionals seriously reduces the possibility of panic.

Clearly, many of the valuable bits of financial advice given for a litigated divorce simply don't apply in the Collaborative Law context. The concerns found in litigation are no longer significant in the Collaborative approach.

Wednesday, August 13, 2008

Child Support and Professional Athletes: Finding a Better Solution

Professional athletes, like other parents, have to deal with child support issues when they don't live with the other parent of their children. Whether the issue arises in a divorce or in a paternity case, or in a suit to modify a prior order for child support, there are special circumstances that need to be considered. Professional baseball, football and basketball players often have child support cases in Texas. There are also some hockey and soccer players as well. Professional athletes can incur significant obligations for child support and must make sure an appropriate amount is ordered. The obligations can go up to 18 years or more, so there is a substantial amount of money at stake for a long time. In addition, the mothers of their children sometimes have special concerns, as well, that need to be addressed.

Because of the unique nature of their employment and because of their often high profiles in the community, professional athletes in Major League Baseball, the NFL, NBA, NHL, soccer leagues and various minor leagues, are probably better served by using Collaborative Law to resolve their family law issues, especially related to child support. Collaborative Law provides a private, respectful and creative environment for solving family problems. It provides a means to create unique solutions and not have everything exposed to the press.

1. How does the process start? To use the Collaborative process, both parties must hired trained Collaborative attorneys. Parents should get some understanding of how the Collaborative process works (I won't go into detail about that here). If it seems like it could work, then the parties should contact Collaborative attorneys near where they live. I normally recommend bringing in a neutral mental health professional who acts as a communication facilitator and a neutral financial professional who works with both sides providing analysis, tax information and projections, among other things. Using both other professionals makes the process work more efficiently and more effectively, as well as being more comfortable for everyone.

2. Determining paternity. If the parties have not been married, a DNA test is usually done so there is no question later about paternity, even in cases where both parties are certain about parentage. If there is a possible question of paternity, then the DNA test is essential. The alleged father must take the test in a timely manner, either by agreement or by court order. Failure to submit a DNA sample can be a reason to be found to be the father. DNA testing is quick, painless and very accurate.

3. What if a letter about possible paternity and child support comes from the Texas Attorney General? If you receive a letter, or get served with papers, from the A.G.'s office, you need to contact your attorney right away. Failure to respond might result in you being named the father of the child, even without a DNA test. Again, you need to immediately discuss the situation with an attorney.

4. How is child support set? In a Collaborative case, the support is probably going to be set based on the needs of the child(ren) and the goals of the parties regarding how the children are going to be raised. In a litigated child support case, the approach is a little more rigid. Each state has a different system and the federal government is very active in pushing collection of child support, but the feds don't yet have a uniform system of setting support for all the states. In Texas, support is calculated from the parent's net income resources. Usually, the support is 20% for one child and 25% for two children, for example, but the state statute allows some variation based on a long list of factors. In addition, if the parent has multiple children by different mothers or fathers, the calculation is different. It is best to visit with an attorney to figure out the possible child support.

5. What are some of the complications? The following are some of the factors that exist and make Collaborative Law the preferable means of resolving the issues.
  • Few professional athletes have truly guaranteed contracts. Even when large contracts are signed, payments may be deferred and salary may not be guaranteed. Some contracts have a lot of incentives, which perpetuates uncertainty.
  • Minor league players make a lot less than major league players and also are subject to significant uncertainty. They may never make it to the big leagues and should pay support based on their actual income, but there could be some creative arrangements to increase the support if the player gets called up to the big leagues.
  • A player can have sudden changes in income from such factors as injury, getting cut, sitting on the bench and having the next contract reduced, or retirement.
  • Another complication, although a good one to have, is the possibility of having a high income at some points in a career.
  • Most professional athletes have a relatively short career, so child support based on a high income should be able to be adjusted.
  • There may a difficulty in setting an appropriate amount of child support when income is very high. In litigation, the child support would be based on provable needs above the standard amounts of support. In Collaborative Law, other standards and goals could be used to establish the level of support.
  • Both parties would likely want to avoid publicity and keep their financial affairs out of the public eye. In addition, unfavorable publicity for the athlete can adversely affect the athlete's ability to pick up endorsements and secondary income. Collaborative Law allows the parties to keep the issues and facts private.
  • If a child has special needs, they can easily be addressed through the Collaborative process.
  • If the parents don't get along very well, working with the neutral mental health specialist in the case might lead to some improvement in attitude and cooperation between the parents.
  • If the athlete becomes disabled, the Collaborative process can provide an appropriate way to adjust the support.
  • Some athletes play for pro teams overseas and that leads to a number of complications, including the cost of living overseas, what expenses may be reimbursed, the uncertainty of payment and the length of the contract, among other things.

6. What can be done? I recommend the parties use Collaborative Law. It is a private process which is controlled by the parties who are assisted by appropriate experts. No order is signed unless the parties agree on it. The system is focused on the underlying goals and needs of the parties and it produces creative new solutions to the problems mentioned above. The first step is to locate and meet with an attorney trained in Collaborative Law. It is the best solution for both the parents and the children who are involved.