• ktidwell

Negotiating A Divorce Settlement

When you are negotiating your settlement, preparation is key to success.

During the course of your marriage, you accumulated both assets and liabilities. Although there are regional differences when it comes to who gets what, everything purchased, received, or saved during your marriage must be divided when you divorce.

So now you’re about to sit down and negotiate a financial settlement with your ex-spouse – but are you truly ready?

As with any negotiation, preparation – including assistance from professionals to ensure your interests are being protected – is the key to success. Here are seven questions you need to be able to answer before sitting down to negotiate:

1. Do you know what your marital assets are?

You can't divide your assets fairly if you don't know what they are. The discovery process can help with this. You can do an informal exchange of lists of assets and debt. Unless you are sure you know of the entire estate, however, you most likely want to use a more formal discovery process involving your lawyer. This method involves each lawyer having their client under oath while listing their assets, liabilities and income.

2. What if there is a business involved?

A business or professional practice tends to complicate a divorce. More often than not, the value of the business cannot be agreed upon. Couples need to strongly consider hiring a professional to conduct an objective valuation.

Then comes the question of what to do with the business. There are a few options such as:

  • One spouse keeps the business and buys out the other spouse using other assets.

  • Sell the business & split the proceeds.

  • Keep ownership of the business at 50/50.

3. What about a budget?

It is important to determine the current incomes and expenses for both parties and to estimate what the future expenses will be after the divorce is final. A Certified Divorce Financial Analyst® professional can play a critical role in preparation for negotiations by determining both a budget and cash flow needs, and also can prepare different scenarios based upon needs and various levels of income.

4. What about pensions?

In many divorces, the future benefits such as pensions are the most valuable asset. A good CDFA® professional and attorney will help you determine the marital portion of these benefits that should be divided as part of the overall settlement plan.

5. What about personal property?

Personal property is important but don’t spend thousands of dollars fighting over property that has more sentimental value than real value. The courts don’t look at replacement value, but the actual value of the item which is often garage-sale prices.

6. What about your home?

Many people are determined to stay in the marital home no matter what. In many cases that can be a big mistake both financially and emotionally.

There are several ways to handle a marital home.

  • It can be sold immediately and the proceeds divided.

  • One spouse can buy out the other’s interest by refinancing or using other assets.

  • Both parties can continue to jointly own the home for a number of years after which the home is sold and the proceeds divided in some fashion.

7. What do you want and why?

It's important to have a game plan when you enter into settlement negotiations. A few questions to ask yourself include:

  • Do you know what you want and why?

  • Do you know what you need?

  • Are you considering all of the options available to you?

  • Are you being realistic in your demands?

During negotiations, it is standard practice to initially ask for more than you expect to receive - without going to extremes. Don’t be a doormat when asking, but don’t be unreasonable either. Unsolvable disagreements arise when couples are negotiating based on wants rather than needs. So take the time to objectively determine your own needs- and those of your spouse- before starting to negotiate.

The Bottom Line

You must be well represented and well advised in order to negotiate effectively. This includes having a clear picture of the finances, and how much you can realistically expect to keep as you prepare to negotiate your settlement.

If your demands are reasonable and based more on needs than wants, then the chances for a quick, fair settlement are good. A team with an attorney and a CDFA® professional can help you understand your needs, your rights, and your true bottom line.