In our last few posts, we reviewed some ways to assess the suitability of mediation for your own divorce. We also looked at how to gauge your readiness to begin the process. Last month we talked about choosing mediators and consulting attorneys. If you have gotten this far, and you now have a mediator and a consulting attorney you are happy with, you are probably thinking you are ready for mediation. Before you schedule your first session though, there are still a few more things to take care of.
Happy New Year and welcome to the 2020’s! The start of a new year, let alone a new decade, always leads a lot of people to decide that it’s time to make real changes in their lives. For some, that means finally sorting out an impending divorce.
Maybe you’ve heard that mediation is a good way to handle a divorce. On the other hand, maybe you just watched A Marriage Story and have been scared away. (For those who haven’t seen the movie yet, heads up, there are some minor spoilers in this post, but nothing you wouldn’t learn very early in the show.) Read more
The year is winding down, and we are already in the thick of the holidays. If you have been struggling with your marriage, you might be thinking that the best gift you could give yourself would be a meeting with a divorce attorney or a divorce mediator. You might also think it makes more sense to ride out the rest of the year without upsetting family traditions. After all, isn’t choosing peace in the spirit of the season? Read more
The winter holidays can be full of joy, but its common knowledge that they can also generate a great deal of stress. For those facing divorce, mustering up any holiday spirit at all can be a challenge. You may find yourself surrounded by high expectations at the exact same time that you must confront the end of one of your most important relationships and the prospect of restructuring your entire family. Read more
Did you make a New Year’s resolution this year to finally move ahead with your divorce? Sometimes couples decide to separate but then find themselves stymied about exactly how to proceed. Even after a New Year’s resolution, daily life has a way of intervening. If you are stuck wondering how to begin the divorce process, consider beginning with mediation. Read more
One of the first things you may hear as a couple interested in divorce mediation is that the process offers “win-win” solutions. Many people find this description confusing. What is a win-win solution? How can we possibly both win when our interests are so divergent? We both want the house, we both want custody of the kids, one of us wants alimony and the other doesn’t want to pay it… Clearly someone has to lose! Read more
Over the past few months, we have been following the stories of three couples considering divorce mediation. Two of them, Gerry and Beth and Katherine and Julian, decided that they wanted to pursue marriage counseling first. Today we are taking a closer look at marriage counseling. When is it appropriate? How is it different from mediation? Is there such a thing as “divorce counseling?” Many people find themselves confused by a variety of options that all sound somewhat similar. Read more
When we last saw Gerry and Beth, they had decided to try marriage counseling. In the meantime, however, Beth is also meeting with an attorney to help her understand what they would need to address in a divorce. Gerry is holding off on talking to an attorney, but he has done a little research on his own. He too is concerned about how they would resolve their financial issues. Today we will consider how divorce mediation might help this couple.
As we learned in our introductory post, Gerry currently earns approximately $150,000 per year as the CEO of a small company. Beth, who spent 10 years as a stay-at-home mom, now earns $60,000 per year as a teacher. She would like to retire next year, when she will be eligible for an annual pension of about $22,000. The couple’s home, which they purchased during the marriage, is fully paid for and has a current value of about $450,000. They have joint savings and investments of $50,000, and Gerry’s 401k has a balance of approximately $800,000.
On the recommendation of her attorney, Ms. White, Beth is preparing a detailed budget and completing a New Jersey Family Part Case Information Statement. She is finding this somewhat daunting with so many decisions still up in the air. Ms. White points out that some of those decisions might be easier with expert assistance. They could start by hiring a joint Certified Divorce Financial Analyst (CDFA). A CDFA can help mediation participants project future scenarios and identify potential ways to optimize each party’s post-divorce financial situation. Hiring a joint CDFA can result in substantial savings compared with hiring separate financial experts for litigation.
Let’s look one at a time at the issues facing Beth and Gerry:
Because the New Jersey alimony statute (NJSA 2A:34-23) does not provide formulas, but instead simply contains lists of factors, mediation is a good forum for presenting alimony arguments. Spouses who work out their own solutions can save a great deal of time and money that they would otherwise spend arguing in court. For example, Gerry and Beth might be able to agree on a graduated payment schedule based on anticipated changes in their future incomes. Their alimony discussion could also intersect with their discussions about property distribution.
Amount of Alimony
Like the first two couples in this series, Gerry and Beth have a significant discrepancy in income. This means that Gerry is likely to end up paying Beth some amount of alimony. Beth assumes that she will receive enough to maintain the marital standard of living. Ms. White cautions her that this would be true only if Gerry could afford to pay this much without lowering his own standard of living. There is also the additional complicating factor of Beth’s decision to retire next year, at 62. This would be entirely voluntary, rather than prompted by a lack of ongoing employment opportunities, ill health, or some other factor beyond Beth’s control. Even if Beth stops working, Gerry can therefore argue that alimony should be based on her $60,000 salary, rather than on the $22,000 pension. This could reduce payments by several thousand dollars per year, significantly impacting Beth’s post-divorce lifestyle.
Duration of Alimony
Unlike either of our first two couples, Gerry and Beth have been married for more than twenty years, allowing a New Jersey court to order “open durational” alimony, meaning an award without a set ending date. There would be a rebuttable presumption, however, that alimony would end when Gerry reaches full retirement age, in only three years. Beth could challenge this based on the factors listed in the statute. These include the parties’ ages, health, and other available assets and income; the degree to which an alimony recipient has depended economically on the other spouse; whether the recipient has reached retirement age and has had an opportunity to save adequately for retirement; whether the recipient has exchanged other claims, such as property rights, for more alimony; and any other factors that a court may deem relevant (NJSA 2A:34-23j (1)).
Distribution of Marital Property
Neither Beth nor Gerry appears to have any separate property of significant value. Their home, joint saving and investments, and retirement accounts or pensions are all marital property, as they were all purchased or funded entirely during the marriage. They would, however, have some decisions to make regarding the equitable distribution of their marital property.
The Family Home
Beth has already indicated that she would like to move to New Hampshire, so it could be up to Gerry to decide whether or not they will sell the family home. Since they bought it during their marriage, they could each begin by claiming half the value. There is nothing to prevent either of them, however, from arguing for a different division. New Jersey statutes include a factor list for this as well (NJSA 2A:34-23.1). If they sell the house, they can simply divide the proceeds. If Gerry wants to keep it, however, they will need to agree on an exact market value, so that Beth can get a credit for her share. They could hire a licensed real estate appraiser for this, or they could simply collect some comps on their own. Gerry might then consider taking out a new mortgage to buy out Beth.
Beth asks Ms. White why Gerry couldn’t just give her a portion of his 401k in exchange for her share of the house. “He probably owes me part of the account anyway,” she surmised, “since he has $800,000 saved already.”
Ms. White’s response is that retirement assets need to be valued differently than other assets. There are also open questions, she points out, about the appropriate ages of retirement for each of them, as well as about the potential impact of social security payments. Beth’s own pension would be higher if she waits until 65 to retire, and it isn’t realistic to expect Gerry to pay for her decision not to wait. “$800,000 might sound like a lot,” she notes, “but it wouldn’t maintain even one person at your current lifestyle.”
“We should just sell the house then,” Beth proposes. “We’ll each have plenty of money after that, because we’ll each only have half the expenses we had before.”
“That’s a common misconception,” Ms. White comments. “One person could need 80% or more of the amount that two people need. You lose the benefit of many shared expenses.”
Beth leaves Ms. White’s office in deep thought. She is beginning to question whether or not retiring next year is really such a good idea. After all, she still enjoys her job. Maybe, she thinks, she should just spend a few weeks in New Hampshire this summer and reconsider everything.
Beth and Gerry still have many things to work out. Our series, however, ends here. As we moved through these stories, we saw two out of three couples decide that they wanted to pursue marriage counseling before deciding whether or not to proceed with divorce mediation. In our next post, we will take a closer look at marriage counseling. When is it appropriate? How is counseling different from mediation? Is there such a thing as “divorce counseling?” Stay tuned as we address each of these questions.
Are you interested in talking to one of our experienced mediators about how to structure your own divorce mediation? Contact us today for a free consultation.
In our last post, we saw Eric and Eva address their child custody issues in mediation, with surprisingly positive results. Today we will look at some of the financial issues they will need to resolve before finalizing their divorce. These include alimony and child support payments, identification and distribution of marital property, and division of retirement assets. Read more
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