There's a new Collaborative Law blog in Oregon, the Collaborative Divorce Northwest blog that is off to a good start. It looks like it will be an interesting blog to follow. They have a recent post that is worth reading on the difficulties many people have dealing with finances in a divorce. The article is by a financial planner who obviously has worked quite a bit in divorce cases. It looks like her experience is similar to that of our financial professionals who assist in Collaborative cases in Texas. That post got me to thinking about some of the financial hurdles people face in going through a divorce.
In a divorce context, people confront several problems in working out a post-divorce financial plan: lack of knowledge, lack of experience and fear of the unknown.
1. Lack of knowledge. It is very common for the spouses to divide up the responsibilities in the marriage by having one in charge of the finances and the other in charge of the household and children. In practice, there is usually very little discussion or joint planning in finances for most or a large number of families. As a result, one spouse is usually somewhat in the dark. That situation is made worse by the fact that finances are getting more complicated and even a college graduate may have trouble keeping up with finances without having everyday involvement. When a divorce comes up, the uninvolved party usually feels very vulnerable because s/he doesn't really know what's there or what should be there.
2. Lack of experience. To compound the lack of knowledge problem, the uninformed partner usually doesn't have much experience in managing the finances. Once the divorce is granted, each spouse will have to be responsible for running his or her own financial life. Even after learning what they have, a spouse who hasn't been paying bills or making investments or other financial decisions usually starts out very insecure in that role. The party needs to learn what to do and obtain some experience in managing things.
3. Fear of the unknown. Aside from all the personal and emotional issues involved in the split up of a family, there is a lot of fear and concern about what the financial future will bring. For the financially less-experienced spouse, it may be hard to look confidently very far into the future. Even for the more experienced spouse, the future may be daunting, especially in times of economic turbulence.
How Collaborative Law Helps
In more and more cases in Texas, we are using a team model which includes an attorney for each party and then a neutral financial professional (FP) and a neutral mental health professional, all of whom have special Collaborative Law training. The two neutral professionals work with both parties, rather than for just one party. The FP is well aware of the issues outlined above and is trained to help resolve them.
- The lack of knowledge is overcome by the parties sharing their financial information and then having the FP analyze and review it with both parties. We often prepare a joint financial summary and exchange documents so that everyone can see everything. The FP will answer questions for both parties.
- The lack of experience can be dealt with by having the FP educate and train one or both parties as needed about how to manage the finances in the future. Financial professionals often help the parties learn to budget and to keep track of their expenses. Parties can also learn how to streamline bill payment, how to save money in different ways and how to avoid unnecessary expenses. Most importantly, the FP is available to answer questions for the parties.
- The fear of the unknown can be mitigated by learning about the financial resources available and in making plans for the future that are tied to the goals each party established at the beginning of the process. There will probably be some concerns about the future, but the worrying can be reduced by having information available and learning new skills to control finances in the future.
Although not all problems can be anticipated, solved or prevented, Collaborative Law provides a great opportunity to manage financial issues that are usually left unattended to in a litigated divorce. Knowledge, learning and planning, facilitated by a neutral, trained financial professional, can help minimize future financial problems for the parties.
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