Effective Use of an Accountant in Divorce

With the recent downturn in the economy, people are feeling insecure about their jobs, their bank deposits, their credit card balances, their retirement account values, and most of all, the plummeting real estate market.

Real estate in general, and the family residence in particular, are proving to be more of a challenge these days to divorcing people. The house that was worth 40% more two years ago may be difficult to sell in a market where loans are harder to qualify for, even at a reduced price. With the double incentives of low interest rates and mortgage interest deductions, many people borrowed against their equity in the past few years to fund new cars, vacations, increased lifestyle, and business start-ups. Because they used their homes as surrogate ATM machines, these families experienced shrinking home values which may have left them with little or no remaining equity. This puts an added burden on a divorcing couple, because selling the family home and buying two smaller homes may no longer be feasible. Therefore, it is even more important to talk to a family law accountant to weigh several options.

One of the thorniest issues in a divorce may be who gets to stay in the family residence, for how long, and who gets bought out. Especially when there are children involved, but even if there are not, a couple in a collaborative practice or mediation case may find ways to compromise with the help of their team. One possible solution may be for one parent to remain in the home with the children for a few years for a period of adjustment, or for enough time for the children to complete the next stage of their education. We can help the couple work out a deferred sale and/or buyout a few years in the future. The current tax laws allow us to make this plan work if, and only if, both parents agree.

Selling the house and dividing the proceeds may not be the optimum solution, particularly during a poor real estate market. More divorcing couples are continuing to live in the same residence, albeit with creative partitioning. Some are remodeling the house in order to create separate kitchens, bedrooms and bathrooms for each spouse. If the property may be subdivided and/or zoning variences are approved, a duplex or "granny house" may be created.

Calculating each spouse's portion of the equity may be a challenge. Did one of the spouses own the home prior to marriage? Were there capital improvements made during the marriage? Was the original loan refinanced? If so, how often? Was cash taken out of the equity? Did one spouse go on title during the marriage? If not, was a quit claim signed? If so, why? Was the signer aware of the ramifications of signing away his or her interest in the real estate? These issues involve complicated calculations for potential reimbursements and equity-splitting that a family law CPA can assist with. Of course, these are legal issues as well.

In a collaborative practice or mediated case, this type of information is more readily available, because both spouses have pledged to cooperate, and to be honest and forthcoming with the details necessary to make a fair and equitable determination of the equity split. This cooperative attitude goes a long way toward saving the couple considerable time and money in compiling the information and coming to an agreement with the assistance of the neutral account and their attorneys or mediator.

The collaborative and mediation processes recognize that one spouse may need a little more help understanding the financial issues and making decisions as to whether or not he or she can affort to stay in the family home and for how long. The accountant may meet alone with him or her to review potential options and budget for the near future.

These are some of the reasons that working with a neutral family law accountant in the collaborative or mediation process helps the divorcing couple talk about and resolve their financial and tax issues faster, better, and cheaper. If you or a friend or family member are considering divorce, we invite you to contact us soon.

Signed, Susan Carlisle, CPA/PFS ABV, CFF
http://www.carlislecpa.com/

Collaborative vs. Court: How Collaborative Can be Better than Litigation

I believe that in most cases a resolution of family law issues should not be treated the same as a lawsuit. However, when most family law matters go to court, this is exactly how they are handled. When your issues are resolved in the courtroom, you and the other party are adversaries. After “argument” the court will make a decision that you and the other party must follow. What would this look like if the resolution of the dispute were obtained through the Collaborative Process? Consider an example of two parents with two small children. Both parents want significant time with their children but they have differences about what the children need and what a good schedule will be. If these parents go to court, they will necessarily have to present arguments to the Judge; this pits them against the other parent in order to persuade the court why the children should be with them more than with the other parent. This requires the parents to position themselves against the other. This frequently causes one or both parents to be negative about the other parent. Often litigation counsel will encourage their client to raise any possible negative history about the other parent, such as prior bad conduct, to persuade the judge. Parties become angry and hurt by the statements made by the other, and, in defending themselves, may seek to bring up “dirt” on the other party. Declarations (the parties' written statements) become clogged with accusations, misunderstandings, and sometimes blatant lies told in order to persuade a judge to agree with them. This kind of litigation can cause a dispute to escalate, cause new disputes, create very angry feelings, and flare hostility between parties, all of which will continue to affect them regardless of how the judge rules. The hurt and angry feelings will no doubt also affect the parties' ongoing ability to work together as parents.
In a Collaborative case, parties will work with attorneys and other professionals, who try to help the parties come to agreements without becoming adversarial. Parties will have assistance to find a way to bridge their differences and to come to a resolution. Old issues and prior conduct which have no direct effect on parenting will not be part of the discussion. Parties will be able to discuss their goals and differences with the other party in a safe and respectful environment. There is opportunity to discuss the “whys” and “hows” of what each parent wants. This is a significant change in how families can seek legal resolution, because they are not trying to persuade a single decision maker, but instead are trying to work together to come to a collaboratively crafted agreement which both parties can support. This difference alone can facilitate making the decisions necessary to resolve family law disputes. These disputes can be hard enough without fueling them with litigation tactics; so this alone presents one of the best benefits of the Collaborative Process.

Submitted by:
Laurel Tuvim Amaya
Family Law Collaborative Attorney and Mediator
www.Ltafamilylaw.com

A SAMPLE COLLABORATIVE CASE: A True Story

This will be a very brief description of a Collaborative Divorce Case completed in 2005 in California.
A mother of a 6-year old decided to get a divorce. Father was unhappy about that, but agreed to go along with a Collaborative process. Both hired collaborative attorneys and chose divorce coaches. This case had relatively few assets and only the one child.
The parents were both devoted to their boy, although their communication had deteriorated as a married couple. The coaches helped them to understand the changes their relationship needed to undergo as they moved from an intimate relationship and living situation to living separately and co-parenting from different households. When the "heat" rose between them, the photo of their son seemed to always bring them back to a more reasonable stance toward each other.
Mom learned that her attempts to get emotional support from Dad were jarring and uncomfortable for him, as he was busy grieving. Thereafter, she went to others for her support. Dad learned that his language about "my house, my money" was demeaning to Mom and inaccurate under California laws, and was able to change his language.
Mom's big concerns about Dad's drinking were dealt with sensitively by the coaches, and Dad promised not to drink for a certain number of hours before and during his time with the son. Mom saw that he was keeping his word.
The child met with a child specialist who represented his needs and concerns to the team. She also proposed some ideas for a parenting plan, and provided support for the child and a forum for him to talk through his feelings about the separation and the changes in his life.
The neutral financial professional in this case reassured both clients with his matter-of-fact neutrality. He especially aided this case by projecting the financial settlement into the future, so the clients could see the long-range implications of their settlement, which allowed them to increase their compassion and good-will toward one another.
The attorneys were very respectful toward one another, made efforts to connect with each other's clients, and quickly sent the clients to coaching whenever emotional issues arose. They skilfully managed the financial settlement and support issues so that (although Dad continually referred to his first divorce which had cost him $400.00) both people ended convinced that they had made the very best of a difficult situation.
When I spoke with Mom a year after the completion of this case, she was happy to report that the parents were continuing to work together in a peaceful and businesslike way to provide the best care they could manage for their child.
This entire divorce took about 8 months and cost the family about $13,000. The team was struck by the fact that this case, if it had not been handled collaboratively, could have resulted in numerous expensive hearings and a great dial of emotional upheaval. The team also was extremely pleased by the way that the communication flowed among team members (massive amounts of sharing by email) and by the respectful and peaceful tone the team kept providing for this family.

Respectfully submitted by:
Divorce Coach, Mary Ann Aronsohn, MA, LMFT
www.aronsohntherapy.com