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Choosing An Easier Path In Divorce
Your clients going through a divorce have important decisions to make to avoid compounding the emotional pain .
By Gus Dimopoulos
DIVORCE PROCEEDINGS , AND ESPEcially high-net-worth divorces , involve countless questions : Which assets are the couple going to split , and how do they split them ? What does child custody look like ? And so on . But every case starts with perhaps the most important question of all : Will the couple settle the matter through mediation or litigation ?
The answer they give you influences everything that follows , from who is involved in the legal proceedings and how long these last to how the assets are ultimately divided . When I have an initial consultation with a divorcing client , this choice is the primary topic of discussion . And in nearly all cases , I recommend that clients pursue mediation , not litigation , for three reasons : One is the cost involved . The second is the emotional downside of litigating . And the third has to do with the feeling of control the clients are going to want to have over their own destiny . These three things should be kept in mind not only by the couple but by the financial professionals who serve them , such as wealth advisors and accountants . Let ’ s break these three ideas down further : Control . When high-net-worth clients ask me whether they should engage in mediation or litigation , I rephrase the question another way to help them see it more clearly : “ Do you want to control your own destiny when it comes to dividing assets in the divorce ? Or would you rather that someone else control your destiny ?”
I ask because when they choose litigation , your clients are outsourcing the decisions about their assets and their life to a judge . They ’ re also opening themselves and their financial professionals to subpoenas , sworn testimony and other mechanisms that will have them feeling as if they ’ ve lost power and agency in a crucial personal matter .
When framed this way , it ’ s clear that mediation is almost always the more prudent path forward . They might not want to deal with the emotions stirred up when they have to sit down with their ex-partner . But mediation ultimately allows both spouses to make common-sense trades and prioritize their preferences when splitting assets .
Cost . The cost difference between divorce mediation and litigation is often staggering . A good mediator could likely get the job done for less than $ 20,000 , a sum that wouldn ’ t cover even a single divorce attorney ’ s retainer when wealthy clients pursue litigation . Wealthy individuals and their financial teams may believe that smart litigation will allow them to walk away with a larger chunk of their assets , but they need to factor in the steep legal costs associated with that .
Emotion . Rare is the divorce without any negative emotions . But if a couple chooses litigation over mediation , I can guarantee
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40 | FINANCIAL ADVISOR MAGAZINE | NOVEMBER 2024 WWW . FA-MAG . COM