This article is from Richard D. Soat, a San Antonio-based financial professional with BDO (a professional services firm providing assurance, tax, financial advisory and consulting services) and a board member of the Collaborative Law Institute of Texas. The opinions expressed on this site are Rick Soat’s own and do not necessarily represent the views of BDO USA, LLP.
The initiation of divorce can be an incredibly emotional experience, to say the least. Whether you’re coming to that determination mutually, or if one spouse announces to the other that divorce is the only option, it generates a potent mix of fear and anger. Couples have to come to grips with potentially-contentious divorce proceedings and the uncertain future that follows. In the midst of that, couples have to get their finances in order to prepare for divorce.
Though this U.S. News and World Report article published last year, it still contains some helpful tips for what divorcing couples need to bring to the table when it comes time to divorce. The “basic” checklist includes:
• Federal/state/gift/ tax returns from the last three years
• Forms W-2, 1099’s and K-1’s from the past year
• Three months of recent pay stubs
• Specified loan applications, deeds and lease agreements
• Bank account statements, including checking, savings and credit cards
. Brokerage statements
• Retirement plans
• Life insurance
As the article notes, “Retrieving such information can prove overwhelming … especially if you are a stranger to your financial situation and aren’t as well-versed in your family’s finances.” This is one of the situations in a divorce proceeding where collaborative law is particularly helpful.
In a litigated case, each party’s attorney will work with the client to gather his or her financial information, but if the other side is unwilling to produce requested documents, it can result in costly, time-consuming legal wrangling in order to make that happen.
In collaborative law, however, the negotiations call for honest and open disclosure, and the lawyers and financial neutral work together to expedite the process. That allows for a faster, more thorough development of the couple’s financial picture, and helps the team work together to insure that each person has a financial plan going forward, based on the assets available and the couple’s sense of what’s fair.
And because it’s a cooperative effort – rather than one where withholding information can be part of the litigation strategy – it often has the effect of reducing legal fees and getting the couple through the divorce more quickly and less painfully.
It also allows a couple to talk about their children’s expenses and determine how the couple will handle those once the divorce is finalized. That’s important for couples with children, because they’ll have to work together after the divorce to raise their children together. Finances are a major source of conflict for divorced co-parents, just as they are for married couples, and the collaborative process can help couples avoid future discord over their children’s financial needs.