Divorce comes with a high price tag, both financially and emotionally, regardless of the steps that are taken between filing the divorce papers and signing off on the final documents. Except for the death of a loved one, divorce is life’s most emotional and psychologically impactful experience. When compounded with financial pressures, child issues, and the legal battle in general, divorce can often become more than one can bear. However, collaborative divorce is an alternative to the highly-combative legal process that offers less stress, less time involved and a lower cost than the more traditional litigious approach. The specialized forensic accountant also plays a unique and advantageous role in the collaborative process, as described below.
Divorce is a civil action that is not unlike suing an at-fault driver in a personal injury claim. Legally known as “dissolution of marriage”, divorce is a real court proceeding. It begins when one spouse, the “petitioner”, seeks to end the marriage by filing a “complaint”. The other spouse, the “respondent”, files a response known as an “answer”. Each party hires an attorney and, at their respective attorney’s recommendation, often hires one or more forensic accountants / business appraisers to gather and interpret various financial data.
During the “discovery” (data gathering) process, each spouse must produce certain records and answer questions under oath through depositions and/ or interrogatories. This process can take months or even years to complete. When the case is finally presented to a judge at trial, the divorcing spouses, along with their attorneys, forensic accountants, business appraisers, and/or other witnesses, go before the judge and present their arguments as to why they feel they should be granted specific benefits as a part of the divorce settlement. The judge then calls the proverbial “balls and strikes” and decides how to divide the marital assets and liabilities – e.g. which spouse gets the house, cars, business interests, cash, credit card debt. The judge also determines child support, awards alimony, and arranges parental timesharing of the children.
The traditional divorce process described above is often referred to as “position-based bargaining”, in which each party stakes their position early in the process, focusing on their own wants and needs rather than a mutually beneficial arrangement with the other spouse. Position-based bargaining is adversarial in nature and has little focus on the impact of future relationships. Each spouse’s mindset is typically one of: “If I can’t get what I want, I’ll leave it to the judge to decide.” That mindset is often a very dangerous position to take, as the judge rarely, if ever, awards one spouse with everything he or she wants.
Collaborative divorce is a much different process. Rather than the adversarial “position-based bargaining” process of traditional divorce, collaborative divorce offers an “interest-based bargaining” approach. This approach focuses on meeting the needs and interests of both parties. This type of bargaining is cooperative rather than adversarial in nature, it encourages open dialogue to resolve issues rather than each side arguing for a specific position, and it allows the spouses to understand the other spouse’s perspective.
At the attorneys’ recommendation, the parties together will often hire a neutral forensic accountant (or financial expert) who works with both spouses to gather data, communicate findings, and think creatively toward win-win alternatives. Rather than a lengthy legal process of producing financial documents, taking depositions and wrangling over every detail, couples, along with their respective attorneys and neutral forensic accountant, work out a mutually beneficial agreement.
In collaborative divorce, both parties will still retain an attorney, but everyone involved agrees to work cooperatively, conduct themselves in good faith, and agrees not to go through the litigation process. The spouses agree to voluntarily provide all pertinent financial information during the collaborative process; thus, the neutral forensic accountant spends less time requesting and gathering data. This approach often results in a settlement involving far less time, money, and emotion than the traditional divorce process.