How Do You Split Up Debt in a Divorce?
Dividing debt in a divorce can be complex. EP Wealth’s Linda Ginder, CFP®, EA, CDFA®, shares insights on handling mortgages, loans, and credit...
true Kathy Costas, CDFA®
Vice President
Westlake Village, California
Mediation during divorce is one way to reach an agreement acceptable to both parties without litigation. Find out how to make the process more productive with tips from an EP Wealth advisor. Divorce financial planning services are available nationwide.
Mediation is a powerful tool that allows divorcing couples to reach a mutual agreement regarding financial matters without litigation. Part of my work as a Certified Divorce Financial Analyst® is to support couples throughout this process.
When it’s done well, mediation can save divorcing couples time, money, and stress.
By definition, a mediator is a go-between who attempts to help people come to an agreement. In divorce mediation, the mediator is not there to get either spouse a good “deal.” Rather, their role is to help facilitate a deal acceptable to both parties.
Couples often ask if financial mediation will work for them. I tell them the first rule is to be transparent. Both spouses have to be open and honest about the finances for mediation to work. The mediator is not there to investigate their financials. They only work with the information they are provided.
Some couples have what I call an “out-spouse.” That’s a partner who may not be involved in the household finances and may come with lots of questions. They may be learning some details for the first time. It’s essential for the other spouse to be forthcoming, or discussions will be stalled.
Also, both parties must be engaged in the process. If one party drags their feet or gets evasive when questions are asked, those are signs mediation may not be a good fit.
Unlike court proceedings, which have very precise deadlines, mediation can really go on indefinitely. A reluctant spouse can cause talks to drag out for years, to the point where the couple ends up spending more on mediation than they would on litigation.
If you’re unsure how your soon-to-be ex will handle mediation, I say treat that first meeting like a job interview. Ask lots of questions. For example, ask the mediator how information will be exchanged—or what the timelines may look like.
Asking questions allows you to connect with and build trust with your mediator. It’s also a chance to observe how your spouse reacts. If there is pushback or defensiveness, it may not be possible to reach your goals through financial mediation.
Another tool I recommend to help make the process peaceful and productive is a financial mediation “mission statement.” Take some time together to write down your goals for the process. What are your reasons for going this route?
Cutting down on divorce costs is one reason clients mediate. Some couples want to avoid exposing their children to unnecessary turmoil.
There are those clients that are looking ahead to the future. They want to be able to attend their child’s wedding or the birth of a grandchild with their ex without conflict.
Ask yourselves, “Can we do this in our own way where we can reach a positive outcome?”
I say: create your mission statement. Agree to it. And when things get challenging, go back and revisit it. It’s a symbol of your commitment to work together and reach an agreement that works for everyone.
As a financial advisor specializing in divorce financial planning, I want to help couples move towards the goal of having two financially sound households where both can thrive during the next phase of life.
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DISCLOSURES
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