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Divorce Mediation and the New Jersey Case Information Statement

mediation CIS

Alice was surprised when her consulting attorney gave her a blank New Jersey Family Law Case Information Statement (CIS) and recommended that she fill it out before her first mediation session. “Ask your husband to complete it also,” the attorney added. “It will really help you organize your financial issues right off the bat.”

Alice took the form home and looked it over and now she is feeling a bit overwhelmed. It’s so official looking and so detailed. Alice and her husband Blake chose mediation partly so that they didn’t have to deal with all the red tape of court. Do they really need to bother with this form? Read more

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College Planning and Mediation: Part II

In our last post, we talked about mediation and planning for college expenses. Today we will look in more detail at the categories that you and your child’s other parent should address in any financial planning meetings about college contributions. These include: Read more

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Tailoring Mediation: Gerry and Beth Examine Their Finances

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.

Financial Backdrop

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:

Alimony

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.

Retirement Accounts

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.

Conclusion

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.

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Tailoring Mediation: Eric and Eva Address Financial Issues

divorce assetsIn 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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Tailoring Mediation: Katherine and Julian Address Their Finances

Today we are going to look at some ways to resolve financial issues in divorce mediation. We met Katherine and Julian in our two previous posts. They are both 33, have no children, and have been married for six years. As we learned last month, they decided to go through marriage counseling to address emotional problems before making a final decision to divorce. If they do divorce, the next question will be whether or not they can use mediation effectively. Read more

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divorce mediation case study series

Divorce Mediation up Close and Personal: Part VIII—Derek and Stacey Calculate New Jersey Shared Parenting Child Support

divorce mediation case study seriesWhen we last saw Derek and Stacey, in Part VII of “Up Close and Personal” they were wrapping up their third mediation session. They had made great progress working out their property division and deciding how to handle child custody, but they still needed to deal with child support, and possibly alimony. Read more

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Divorce Mediation up Close and Personal – Derek and Stacey, Part VII

child supportIn Part VI of “Up Close and Personal,” our divorce mediation case study series, we watched Derek and Stacey reach several major decisions regarding distribution of their marital property and debts. As we rejoin them, they are returning to their third mediation session after a break. During the break they reviewed some charts that their mediator, Ms. Smith, made up to illustrate the property division. She asks if they have any questions. Let’s see what happens next… Read more

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Divorce Mediation up Close and Personal – Derek and Stacey, Part III

DivorceIn our first installment we discussed the events leading up to Derek and Stacey’s decision to participate in divorce mediation. In the second installment, we looked in on their first session. Now let’s see how things are working out for them during session number two. Read more

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Using Experts in a Financially Complicated Mediation

60 - Stock_000007053168XSmallPreviously, we blogged about choosing mediation in a financially complicated divorce. As we discussed in that post, even though a complex mediation may take more time and involve more costs than a simple mediation, the proportional cost savings compared to litigating a case can make mediation a very attractive alternative. One of the major reasons financially complicated divorces tend to be more costly is the necessity of using experts. Choosing to use joint experts and abbreviated reports in mediation can result in considerable savings.

What kind of financial experts do couples going through divorce mediation typically need? While each case is different, the following list will give you some idea of what types of experts you might need, as well as exactly what each expert can do for you. Read more

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Is Our Divorce Too Complicated for Mediation?

Financial collapse

If you and your spouse are interested in resolving your divorce issues through mediation, but one or both of you believes that the complexity of your financial situation makes mediation an unlikely fit, you may want to rethink the possibility. While it is true that mediating a complicated case could be a lengthier and more detailed process than mediating a simple case, it is also true that litigating a complicated case generally takes more time and more attention to detail than litigating a simple case. This means that your costs are apt to be higher than normal if you go to court, but your savings from choosing mediation could also be greater than the average savings.

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