Divorce sucks. Even if you are amicable, it still sucks.
In a divorce, you need to consider what needs to be negotiated and then how to negotiate it.
Let’s start with what needs to be negotiated.
Divorce Law 101
I have simplified the law in this blog to make it easier to understand. If you want a more comprehensive explanation of what needs to be negotiated, please click here to download my book Divorce Without Drama.
Whenever I mediate a divorce, I mediate everything in the following order: the kids, the support, the assets, and the liabilities. Let’s discuss these topics in order.
Parenting Time and Custody
Parenting time refers to the time spent with your child. If you get your child 50% of the time, it is 50/50 parenting time, NOT joint custody. So, parenting time equals time with your kid.
Regardless of what your work buddy tells you, there is no ‘standard parenting time’ in Oregon. The law requires a parenting time schedule that is in the best interests of your child. The hard part is getting both parents to agree on what is in the best interests of the child.
Custody means the legal decision-making authority over your child’s life, such as education, religion, medical care, and residence.
Sole custody means that one parent holds the decision-making power for education, health care, religion, and residence. Joint custody means that both parents must agree upon the child’s education, health care, religion, and residence.
A court cannot force you into joint custody, which means that if both parents do not agree on joint custody, the court will order sole custody to one of the parents.
To illustrate the differences between parenting time and custody, parent A can be awarded sole custody and parent B can be awarded 100% of the parenting time. Really? Yes, really. These two concepts are mutually exclusive from each other.
Child Support and Spousal Support
Child support is a calculation based on various factors, such as the parents’ incomes (including spousal support), the number of children, the number of overnights with each child, and health insurance costs. Click here to calculate your child support.
Spousal support is not a calculation, it is a negotiation. Spousal support is often negotiated based upon factors such as the length of the marriage, the differences in incomes, the earning capacities of the parties, and the standard of living during the marriage.
Assets of the marriage include anything that has value. It doesn’t matter whose name is on the asset’s title. If it was acquired during the marriage, it needs to be valued and included in the divorce. How you value an asset is negotiable, but the asset must be included.
The formula for assets is quite simple: the asset’s fair market value – any debt attached to that asset = the value. Let’s look at an example of a home. The valuation formula looks like this: $750,000 – $450,000 = $300,000. So, if the house is valued on Zillow for $750,000 and you have a $450,000 mortgage, then the equity value for the divorce is $300,000.
Not to complicate our simple formula, but if the asset was brought into the marriage, such as a retirement plan, then the formula would also include a premarital discount as follows: fair market value – (liability + pre-marital discount) = value. For instance, if your retirement plan is now worth $400,000, but it was worth $150,000 when you got married, and you have a $10,000 loan from your plan, then it looks like this: $400,000 – ($10,000 – $150,000) = $240,000. So, the equity value is $240,000.
The complicated concepts of passive growth income, capital gain discounts, future tax discounts, present value discounts, vested and non-vested shares, valuation of businesses or pensions, and appraisals for commercial properties are too complicated to discuss in this blog. Please see my book Divorce Without Drama for further information.
Liabilities (aka debts)
All liabilities must be accounted for in a divorce. It doesn’t matter if a liability is in one party’s name. It doesn’t matter (for the most part) who created the liability. If a liability was created in the marriage, then we count it.
There are two different types of liabilities: secured liabilities and unsecured liabilities.
A secured liability is a debt that is attached to an asset. Secured liabilities tend to be houses with mortgages, cars with loans, etc. In divorce, we deal with secured liabilities within the asset’s value, such as the house example in the Asset section above.
Unsecured liabilities tend to be credit cards, student loans, etc.
Just as with assets, if a liability was brought into the marriage, then we discount that liability for the pre-marital amount. For instance, if a credit card balance was $10,000 upon marriage and only interest was paid each month, but the card was continually used during the marriage, and now has a $26,000 balance, then the marital balance is discounted by the pre-marital balance. It looks like this: $26,000 – $10,000 = $16,000. We use the $16,000 balance in the divorce.
Student loans are a unique animal. They are awarded to the person whose name is on the loan, and most times, but not always, their value is not included in the divorce. Why? Because an education is an intangible asset that cannot help the other party.
Credit cards come in one of three flavors: (1) in one party’s name, (2) in one party’s name, but the other party is an authorized user, or (3) jointly held. Most folks think their credit cards are in their sole name, but really, they are either an authorized user of their spouse’s credit card, or it is a joint card that only one party uses.
How do you find out? Check your credit report, not your credit score. Click here to access your free federal credit report (no, it won’t drop your credit score by checking). Your credit report will show you which credit is held in your name and if it is also held in your spouse’s name.
Joint debt with a balance that cannot be paid-off in full, complicates the divorce. For instance, if you have a jointly held Capital One card, but not enough money to pay it off or you do not qualify for additional credit to transfer the balance into your sole name, then we may need to sell an asset to pay-off the balance of the joint Capital One.
Ways to Negotiate Your Divorce
Now that you know what you need to negotiate, it’s time to learn how to negotiate a divorce. There are four different ways to negotiate a divorce. Each process has its own unique advantages and disadvantages.
You can each hire attorneys.
This is the safest option. You are each represented by an attorney whose sole job is to get you the best deal for you. It is also the most expensive option. As I write this blog, most couples who elect to hire two attorneys, will generally spend between $15,000 – $20,000 EACH for a total of $30,000 – $40,000! Yes, you read that correctly.
It saddens me to acknowledge this, but most attorneys don’t tell potential clients what a typical client actually pays to get the divorce finalized. Instead, they tell a potential client they require a $2,500 retainer fee to get started and then the attorney says, “I will do my best to keep the costs down.” They never keep the costs down and it always is more than $2,500… a lot more. Ask anyone who has used an attorney for a divorce and they will back-up my claim.
You can have one spouse hire an attorney.
This is a horrible choice. Why? Only one party is represented by the attorney. Why does this matter? Keep in mind the attorney’s ethical duty can ONLY be to the party they are representing. They will draft the documents in their client’s favor. That’s their job. This tends to cost about $5,000 – $7,000 total. So, yes, it’s cheaper than hiring two attorneys, but it screws one party.
You can do the paperwork yourself.
In rare circumstances, some parties can get away with properly handling the paperwork themselves. If you do not have any assets, any kids, you both earn equivalent incomes, and you don’t owe any money, then you can likely do the paperwork without any worry. But if you have any of these, then you don’t know what you don’t know. This is a super cheap option and costs about $20 in document fees. You get what you pay for.
You can hire a mediator.
Yes, I am a mediator, and thus, partial to this option, but I talk people out of mediation several times per week.
You should consider mediation if you don’t want drama, if you don’t want to screw your spouse, if you trust your spouse to make decisions with your mutual best interests in mind, if you want you and your spouse to determine what is fair, and not the court, and if you want to save money, but also have everything done correctly.
If you are trying to mediate just to save money, but you can’t agree on the most contentious parts, then you are wasting your money.
Scary fact: anyone in Oregon can call themselves a “mediator” because there is no licensing or qualification for “mediators.” Your manicurist must be licensed, but mediators aren’t required to be licensed or credentialed.
So, how do you find a divorce mediator who actually knows what they are doing?
I strongly recommend ONLY hiring an attorney-mediator. Why? Attorneys have been educated in how to handle a divorce. Non-attorney mediators don’t know what they don’t know. Meaning, if they haven’t been educated in capital gain discounts, then they don’t know to look for the problem and advise you accordingly. The examples are endless of how non-attorney mediators mess-up a divorce.
You Get What You Pay For
People pay real estate agents tens of thousands of dollars to handle paperwork for the sale of a single asset (i.e. the house) without questioning the fees, but balk at hiring an attorney-mediator to unravel all aspects of their married life to single life (including that house and much, much more). When you compare the cost of a real estate agent to the cost of an attorney-mediator, it is equivalent, and at times, the attorney-mediator is less expensive.
No one wants to pay for their divorce. But, here’s the truth…
You aren’t paying for the divorce. You are paying to protect your kids, your assets, and your liabilities. This is your entire life. Why would you risk it?
Several years ago, I (unfortunately) went through my own divorce. Of course, I handled my own divorce for free, but I was still incredibly stressed about finances, and that was without having to pay for an attorney or mediator to handle the divorce.
My own divorce made me look at my fees differently. So, I created a flat fee package structure for my clients.
My flat fee packages are all-inclusive and I handle everything from beginning to end: all the mediation, all the documents, and I even handle the judge’s staff when they are being difficult. You can call me and email me and zoom me as much as you want. You know exactly what you are paying for and you are getting what you need to accomplish your goals.
What is the best part of flat fee packages? You know ahead of time exactly how much it will cost and you will never receive an invoice billed in 6-minute increments.
To Zoom or not to Zoom
The beauty of technology is that anyone in Oregon can mediate their divorce with Mediation Northwest through Zoom. Before the pandemic, I mediated divorces through Zoom about once a month. Then, the pandemic forced me to mediate all divorces through Zoom. I was shocked to discover that mediating through Zoom was easier on my clients. Why?
Remember how I told you divorce sucks? It super duper sucks when you are sitting next to each other listening to each other breathe and feeling each other’s moods. This sounds ridiculous, and yet, I can’t tell you how many times I’ve heard during an in-person session, “I can’t stand listening to XYZ breathe,” or “I can feel XYZ’s mood.” The Zoom technology adds a technological layer between yourself and your spouse, which allows you not to be as bothered by your spouse’s energy (or their breathing).
I’ve noticed that divorce mediations through Zoom are quicker and less irritating than in-person sessions. Because of this, except for my all-inclusive package, I exclusively mediate all divorces through Zoom.
Disclaimer: the information contained in this blog is for citizens of Oregon. I am not your attorney, nor am I your mediator. If you need to learn about your specific situation, please contact an attorney.