Collaborative Prenuptial Agreements

Our good friend Sam Hasler from Indiana has a brief post in his blog today about using Collaborative Law as the process for creating a prenuptial agreement. His blog, "Sam Hasler's Indiana Divorce & Family Law Blog" is always a source for new ideas and good approaches for dealing important family issues. Here's what he wrote about prenuptial agreements and Collaborative Law:

"From Family Law Week comes Collaborative prenuptial agreements find favour

"According to The Law Society’s Gazette, a rising number of clients contemplating marriage are asking for prenuptial agreements to be prepared using the collaborative law model. The report records a shift in attitude among clients who would prefer to adopt a more consensual approach to agreeing a pre-nuptial agreement rather than employ the more traditional, oppositional method of negotiation."


I have previously written about using Collaborative Law for prenuptial agreements for professional athletes and using it generally for prenuptials for anyone. Prenups are very often put off until the last minute before a wedding, which makes the process much more stressful and difficult. Sometimes weddings are cancelled or postponed because of intense negotiations that aren't resolved satisfactorily.


Here's why you should use Collaborative Law for prenuptial agreements:

1. The process fits the need. I am a strong advocate of using the Collaborative process for prenuptial agreements. Working out a prenuptial is almost like doing a divorce in advance. There must be a lot of disclosure, planning and problem solving. The parties need to be able to look into the future and make binding, very important decisions about their lives and financial well-being.

2. The (Texas) process utilizes a mental health professional. The negotiations often bring out the worst in people, if the issues aren't handled well. With Collaborative Law, we normally bring in a mental health professional to assist the parties to communicate effectively and deal with the stress, and that would be essential in this type of negotiation.

3. The (Texas) process utilizes a financial advisor for both parties. We also bring in a neutral financial advisor who can help each party understand the financial consequences of the terms under consideration. The financial advisor also helps evaluate the tax effects of various options. Another helpful element is having someone who can assist both parties with budgeting and projecting their needs and capabilities in the future.

4. There is greater assurance of transparency and the sharing of all relevant information. That is a fundamental element of Collaborative Law, so there would clearly be an emphasis on providing the needed information and openly discussing matters.

Using all the Collaborative professionals to prepare a prenuptial agreement will benefit everyone involved and help avoid the disasters of a failed agreement or an uninformed agreement. The Collaborative process would require that the parties start well before the wedding date, instead of waiting until the week of the wedding, which is what sometimes happens now. It should result in a better agreement, everyone feeling better about the process and a happier wedding.

Get a Second Opinion on Using Collaborative Law if....

Choosing the right attorney is a critical step in using Collaborative Law to help you resolve a family law issue. In any kind of legal matter, you have to carefully select your legal advisor and advocate, but with Collaborative Law, extra care is necessary. Collaborative Law attorneys receive additional training so they can learn new skills and a new mental approach to handling cases. We call it a "paradigm shift". We realize that Collaborative Law requires a different orientation by the lawyer. It's not just a question of whether we can negotiate effectively. Our whole approach to a case is radically different and lawyers who haven't been to at least a 2-day basic training in Collaborative Law don't have a clue about what we are really doing or how we approach cases differently.

Unfortunately, some lawyers who are not trained will claim to be Collaborative lawyers. Some do it because they are genuinely interested in the process and have been persuaded of its value by things they have read or heard. Others, however, claim to be Collaborative and then work hard to talk any potential client out of using Collaborative Law. Sometimes they put their uneducated opinions on their web sites, where it is obvious that they are strongly biased against Collaborative Law even though they claim to practice it. Others wait until the prospective client visits them and then the attorney verbally attacks Collaborative Law in general or as it would work in their case.

How to evaluate an attorney for handling a Collaborative case.

If you are searching for a Collaborative lawyer to help you in your case and you run into a lawyer who tries to convince you that Collaborative Law wouldn't be appropriate or wouldn't work in your case, you should look into these questions:

• Has the attorney had at least one 2-day basic training in Collaborative Law? Tip -- the more training the attorney has had, the better (for you). If the attorney hasn't been to a 2-day basic training, don't waste your time with him/her.

• Has the attorney had any Collaborative training recently? Recent training is always good. Some attorneys went to a basic training years ago and have never worked on a Collaborative case. A lack of experience combined with outdated training results in bad advice for you.
  

• How many Collaborative cases has the attorney handled? If there haven't been any and the attorney is trying to talk you out of using Collaborative Law, you should move on.

It is very true that not every case is a good candidate for Collaborative Law, but you need an unbiased, qualified attorney to help you decide if you should use Collaborative Law. If you meet with an attorney who tries to talk you out of using Collaborative Law, please do yourself a favor and get a second opinion from a qualified Collaborative Lawyer.


How do you find a good Collaborative lawyer? Get referrals from friends or lawyers and other professionals, and do research on the Internet. A good starting point is the list, with background information, on the CLI-Tx web site at www.collablawtexas.com. If you really want to try Collaborative Law (and you should!), don't take no for an answer from the first lawyer you meet with.

What Happens to the Family Business?

Sometimes, families facing a divorce have a successful family business which must be included in some fashion when a plan is agreed upon to divide the parties' assets. Because Collaborative Law encourages the parties to be creative when they decide how to divide their assets, there will usually be numerous possibilities to consider. In traditional litigation, the options are usually somewhat limited. Probably the two most common approaches: a value is put on the business and one party buys out the other, or they just sell the business. To have a buy-out, usually each party will hire his or her own expert to value the business and then they negotiate or have a hearing to determine the value.

A Collaborative case is different.

Setting Goals
The Collaborative approach can be radically different. One of the first steps in the process is to determine the goals for each party. The goals may include retaining an ownership interest in the business or might be a desire to exit the business. Instead of planning to arbitrarily split the value of the business, the parties are free to begin by stating their preference. The preference could be to share ownership and operation of the business, it could be to sell to someone else, or it could be some other choice they come up with. The key is to start by asking what the goals, needs and interests of the parties are, and then fashioning a plan around those objectives.

Neutral Expert
Another difference between Collaborative Law and litigation is that Collaborative normally uses a single, neutral expert, chosen by both parties, to place a value on the business if that value is important to their approach. That saves money for the parties and reduces the arguments between the sides.

Gathering Information
As the parties gather information during their Collaborative divorce, the attorneys will evaluate the facts to determine if there are any legal issues, such as possible separate property or possibly a reimbursement claim, that need addressing. In a Collaborative settlement, those issues aren't automatically major issues. Their importance depends on what the goals are for each side.

Creating Options
After the parties gather information, they will generate options. Dealing with a family business, the parties may consider a wide range of choices. They could include some of the following:

• Continuing in business together, even after the divorce is final. Each might control certain aspects of the business.
  
• One side buying out the other, either immediately or over time.
  
• One party taking the business and the other party taking another valuable asset.
• The parties could jointly sell the business.
• They could dissolve and liquidate the business. Sometimes the components may be worth more than the intact business.
  
• They could agree to change the format or the products of the business, or go from retail to wholesale, or vice versa.
  
• They could divide the business or assets where there are multiple locations, such as a restaurant chain or several pieces of real estate.

And there could be other choices as well!

Conclusion
With expert financial and legal guidance, both parties can reach agreement on the best financial terms for themselves, consistent with their underlying goals. Collaborative Law provides the best chance of coming up with a win-win solution for both parties. Usually, couples don't continue to operate a business together after a divorce, but that is one of many options available with the Collaborative process. How ever they slice it, couples benefit by keeping control over the outcome of their family business.

What If Your Spouse Doesn't Want to do Collaborative Law

A situation that comes up occasionally is that one spouse will decide that a Collaborative divorce is the best approach, but the other spouse doesn't agree. Unfortunately, it is impossible to force someone to use Collaborative Law if they don't want to use it. It can be very frustrating for a husband or wife to research the subject and come to the conclusion that Collaborative Law would be best for both parties and then find out that their spouse disagrees. In some cases, maybe you are just stuck in litigation. In some other cases, you may be able to have a mature discussion and persuade your spouse to join you in collaborating. If you want to try to do that, here are some ideas to consider.

1. Try to find out the reason or reasons for the objection to Collaborative Law. Once you understand that, you may be able to come up with reasons to overcome the concerns.

2. Be sensitive to the need to avoid the appearance of pressuring your spouse. Sometimes that alone will make your position unacceptable to your spouse. A spouse may believe that if you want something, it must be bad for them. Try to promote your suggestion in a way that appeals to your spouse.

3. Try to explain the benefits of the process from your spouse's point of view. Some of the following may appeal to your spouse:

• Avoiding public exposure by meeting and discussing matters in private.
• Having control over the outcome.
• Keeping financial records private.
• Ensuring that the negotiations are held on a level playing field. Expert guidance is available to help eliminate the advantage of more knowledge or experience with some issues.
• Avoiding the duplicate expenses of having competing experts for property appraisals or business valuations.
• Encouraging creative new solutions, instead of the statutory guidelines or minimums.
• Focusing on planning for the future.

If those reasons don't seem to appeal to your spouse, talk with your Collaborative attorney or other professional and come up with some other approaches to present. The Collaborative process can't be forced on someone, but it's really worth a strong, intelligent effort to show the benefits to your spouse so you can both win.

Should Professional Athletes Use Collaborative Law?

Many athletes seem to think that they become almost bullet proof and that once they reach a certain level of athletic achievement, they can control virtually all aspects of their lives. They seem to believe that the money, notoriety and power that come with success on a big stage will enable them to avoid the problems that the general public experiences in everyday life. That is often true. Sometimes they can make problems go away with just a little money. On the other hand, occasionally, celebrities discover that they are caught in a quicksand that seems inexorably to suck them in with a tighter and tighter grip. Eventually, they face a fight to survive.

Traditionally, professional athletes relied on money, connections and/or a forgiving public to get through a crisis. Sometimes that doesn't work anymore, especially in personal and family matters, as several politicians and ministers have discovered in recent years. Depending on what transgressions may have occurred, athletes may face the end of a marriage, or other consequences. As great a loss as that may be, it can get worse. Celebrity athletes can also face embarrassment brought on by an ugly divorce, which can end up costing tens of millions of dollars, or more.

When a crisis arises, the first response, after the initial denial, is to try to keep everything under wraps so the disputes and allegations are not exposed to the public. If it looks like the issues won't go away, the parties should consider utilizing Collaborative Law as the means of resolving the matter in a way that protects the interests of both parties.

Why is Collaborative Law preferable in sensitive cases? Here are some reasons:

1. It's a private process. High profile people, athletes, entertainers or otherwise, need good publicity, but can really be hurt by a messy divorce or custody fight. Collaborative Law provides a safe, private environment where issues can be addressed and solutions can be created without disclosing details to the public. Privacy is one of the fundamental elements of Collaborative Law.

2. The process encourages creativity. In fashioning solutions for various issues with unusual characteristics, the parties are not bound by the standard solutions that courts use. Instead, for example, they can agree to financial terms which may adjust depending on the athlete's income or contract status. They can also allow the parties the freedom to create unique schedules for sharing the children, taking into account seasons, travel and other variables.

3. The parties stay in control. In litigation, if the parties can't agree, they give up their control over the outcome and let a judge make a decision which is binding. In Collaborative Law cases, the parties make all the decisions jointly, sometimes with assistance of neutral experts. The negotiating process changes dramatically in a Collaborative case because both parties, both attorneys and the other professionals in the case all have a vested interest in not giving up and letting a judge decide. They work hard to keep coming up with new and different approaches. Someone with substantial assets, or the spouse of that person, may not be very comfortable letting a stranger make personal and life-changing decisions about them. In Collaborative Law, both parties keep their power to decide the outcome and both parties participate fully in the decision-making process.

4. Both parties focus on the needs and interests of the parties. Collaborative Law encourages a more intelligent approach to problem solving. Instead of taking arbitrary positions, such as demanding a 50-50 or 60-40 split of the property, the Collaborative approach starts with both parties evaluating their own situations and deciding what their underlying needs, interests and goals are. It's a more comprehensive approach than how traditional litigation negotiations are done and the result is a plan that is geared toward the important issues for each party.

5. Experts are used as neutrals throughout the process. In Texas Collaborative Law cases, we usually bring in a therapist and a financial advisor to help with the parties. In a case with special aspects, such as a celebrity athlete being involved, other specialized neutral experts can easily be incorporated for specific needs, such as tax planning, children's issues, retirement planning, investment management, etc. In litigation, if those experts are used, each side normally hires their own expert and there's usually a battle of the experts at trial, at substantial expense to the parties.

Let's hope that the next time a professional athlete faces a divorce after some personal failure, that the athlete and his or her spouse are aware of Collaborative Law and choose to use it as the problem-solving process for ending their marriage. There have been too many high profile ugly celebrity divorces. It's time to take divorce "to the next level", to borrow a term popular with athletes and coaches, and to work Collaboratively.

How to Prepare for a Collaborative Law Case

I recently read a post on a business news blog that discussed how to deal with the distractions presented by the Internet. The article described the common problem of starting out researching one topic and then drifting from topic to topic, but I digress. The writer had some interesting suggestions on how to stay focused on what you are looking for, and I thought the ideas, simple as they are, were equally applicable to Collaborative Law cases. So, with a nod to the Harvard Business Blog, here are some common sense things anyone and everyone should do to prepare for, and work through, the Collaborative process.
1. Sleep well: We all know that we operate better physically and emotionally when we are well rested. If you are having trouble sleeping, get some help so you can be alert when you need to be.
2. Eat well: A lot of people lose weight going through a divorce, but they often do it by not eating because they have lost their appetite. While that is often normal, you know that you cannot operate at top efficiency if you are hungry or if you are not eating properly.
3. Minimize stress and anger: One reason we bring in a neutral mental health professional is to help both parties deal with the stress and the variety of emotions they experience. We recognize that Collaborative Law is a difficult process and you should keep in mind that it usually doesn't always go smoothly or easily. Everyone starts out wanting to be nice, but people can get tired and frustrated as we go through the process.
4. Watch out for time wasters: We try to have an agenda for each joint meeting and we try to stick to it. Some of the worst problems that arise in Collaborative cases occur when the participants get off the agenda and start on topics that were not planned for in advance. Staying on the agenda means that everyone can be prepared for the discussions and actions that need to take place. It also means that the meetings can end on time.
5. Work smarter, not longer: There are good reasons why we normally schedule meetings to be 1.5 to 2 hours long. The parties sometimes ask to extend meetings so we can finish up the process sooner. We have occasionally worked longer than 2 hours in a session and my experience is that those meetings often become counterproductive because everyone becomes tired. Once people start to get tired, they either shut down or (more often) become argumentative and angry. We not only lose momentum, but we sometimes lose the progress we had been making. We are better off coming to meetings with an organized agenda that we are all prepared for.
We have to keep in mind that Collaborative Law is not a one-meeting, quick process. There will be a series of meetings and everyone will get tired during the process. The more prepared and relaxed we are going into the process, the easier the process should be for us. As you can see, there's no magic here, but you will benefit by trying these easy steps.

Stop Re-living Someone Else's Past!

Tracy Stewart is a CPA in College Station and a very active neutral financial expert in Collaborative cases. She is also a very good writer and produces an excellent blog, the Texas Divorce Finance Blog. She mixes common sense, good financial advice and very appropriate suggestions for Collaborative cases. She recently posted about a common problem that many people face. No matter how many times attorneys and other professionals tell clients not to listen to what their well-meaning family, friends and even strangers want to tell them about how to act in a divorce, the easiest course of action usually seems to be to ignore the professionals' advice and do what the amateurs suggested.

I do my best to make it clear that such a course of action is almost always a bad decision, but Tracy really makes the case in a way that can't be misunderstood. Here's her excellent post:

"Not infrequently, I hear people tell me about the divorce advice they are absorbing. This advice comes from people they trust and believe.

"My friend, who’s been through a divorce, told me I need to hire the meanest attorney I can find so I can crush my nasty husband/wife.

"My friend, who’s been through a divorce, told me to withdraw all the money from our savings account before my wife/husband does it first.

"Do not allow these people relive their divorces through your life and at your emotional and financial expense. If you must engage in such conversations with them, keep it restrained to a pat on the head/hand/shoulder and murmur, 'There, there. It must have been an awful ordeal for you'. But do not get take their advice. Their divorce is not your divorce and vice versa.

"Normally, they are not divorce professionals. (Even if they are, they are not objective.) They don’t have a thorough understanding of marital dissolution law, divorce finances and the relationship nuances of your crumbling relationship.

"Not infrequently, I see people go through senseless emotional turmoil, wasted time and ill spent money in their efforts to follow their friend’s sage advice. Of course, you can have girlfriends or buddies with whom to drown your sorrows or cry over coffee. But do not take their advice. Seek professional advice.

"Remember: You are not divorcing your friend’s ex-spouse."

Advice from friends and family is an abundant commodity during a divorce. Sometimes it's good, and it's given with the intention of helping you, but following the advice can conflict with the strategies that your professionals are using for your case. You should keep in mind that your shadow advisers are not in charge of the case, they don't have the legal or technical knowledge that your professionals have and they don't know how their suggestions fit in, or conflict with, your overall case strategy. It's fine to pass along to your attorney or other professional the golden nuggets of information you hear, but let the professional decide whether to implement the suggestions. Your focus must be on taking care of your case rather than validating someone else's leftover strategies from their divorce.