Financial decisions are some of the toughest issues to work through in divorce. Deciding how to divide up assets or liabilities or devising long-term support scenarios to cover the expenses of two homes can be difficult. When you add in the emotions related to finances and personal financial experiences – it can get really complicated.
In a collaborative divorce, where both parties agree to negotiate and settle their case out of court, financial agreements are often more thorough and more complete. Resolutions may include tax implications, cost basis analysis, or long-term financial projections. During the process, couples can more completely analyze the financial options and, often most importantly, the team can work to address emotional feelings about finances.
In one type of therapy, called dialectical therapy, clients are urged to balance their logical minds with their emotional minds. According to the theory, all couples have both types of thinking. Logical thinking is orderly, concise and reasoned. A logical decision would be to keep money in bonds that are likely to be fairly stable over time instead of a risky stock investment that is volatile along with the markets.
Emotional thinking, on the other hand, focuses on an individual’s feelings or history with decisions. An emotional decision may be to pay off a home mortgage because it “feels” good, even though having a mortgage may have more financial benefit. Other emotional decisions may rely upon personal experience. Someone may make the emotional decision to keep cash under the mattress in case he needs it in an emergency because that is what his father did and advised him to do.
In a collaborative divorce, couples work with a financial neutral to help balance these two sides. In dialectical therapy, the overlapping space between the logical mind and the emotional mind is the wise mind. In divorce, couples who use their wise minds often have the best outcomes. They will balance the logical, smart decisions with options that feel good. While outcomes may not be perfect, they are more likely to feel good if they are in the wise zone.
Take for example a couple that has equivalent amounts of financial value in home equity and a stock portfolio. The logical option may be to divide both equally – split the stock account in half and sell the home sharing the equity equally. Maybe one spouse is emotionally connected to the house and the other likes the risk of the stock market. Dividing the assets this way may make emotional sense, but is it wise? A wise option could be to evaluate the home market and estimate future value while looking at the stock portfolio and the level of risk associated. Analyzing the cost basis in both investments and potential tax implications could also help the couple create a wise resolution.
Collaborative divorce allows couples an opportunity to commit to an out-of-court, non-adversarial process to reach mutually acceptable resolutions. Good collaborative professionals can help couples bring their best selves to the process and use their wise minds for the best possible outcomes.