Complex Financial Assets Division in Divorce Mediation
Besides child custody, child support, and alimony, divorces involve dealing with other complex issues, such as the division of marital property and complex financial assets.
Dividing complex financial assets in North Carolina during the divorce process can be challenging. Depending on the divorce method, the complexity can be more or less pronounced.
The main methods of dividing complex financial assets in a divorce are litigation and family mediation.
Let us go through some of the most common assets and examine the advantages of mediation over traditional litigation.
Complex Financial Assets
Complex financial assets include highly valued collections, real estate, stocks and bonds, bank accounts, investments, and intellectual property.
Highly valued collections of unique paintings, rare artifacts, and old-timers are typical for wealthy couples in high-net divorces. Those assets are subject to equitable distribution in North Carolina. The Division requires the help of financial experts such as appraisers.
Real estate is a complex financial asset because it often includes multiple properties apart from a family home. Dividing a family home can be sensitive, so selling the home is sometimes the best solution. However, determining the value of the house and dividing the price requires the assistance of appraisers and real estate experts.
When it comes to stocks and bonds, the key to fair division is determining their current and potential value, including the contribution to the investments of each spouse. Of course, the division of these complex financial assets is impossible without the help of an experienced attorney and financial experts.
Bank accounts are another complex financial asset. Bank accounts opened during the marriage are marital property, regardless of whether you own joint or separate accounts. In some cases, bank accounts are considered individual property (if a prenuptial agreement defines them as such). The key is that there has been no commingling of funds. As in other examples, only financial experts can answer that question.
The complexity of investments results from the division of dividends. Identifying when the investment happened—before or during the marriage—is vital for proper division. For example, if the spouse invests before the matrimony, but the income materializes during their life together – the dividends are generally considered marital property. The situation is even more complicated if one spouse invests before and holds funds passively in a separate account. Business appraisers and actuaries are crucial in determining whether these assets are individual or marital property and how to divide them fairly.
Finally, dividing income from intellectual property rights (licensing, franchising, etc.) can add to the complexity of divorce.
The Advantages of Dividing Complex Financial Assets in Mediation
Traditional court litigation is an expensive and time-consuming process. The complex litigation rules and the use of multiple experts from both sides result in a lengthy and costly procedure that often cannot successfully resolve key divorce-related financial issues. As a result, state judges lack the time, knowledge, and resources to tackle the complex task of financial assets division.
An out-of-court method, mediation offers numerous advantages over litigation in dividing complex financial assets.
In mediation, parties agree to retain a single expert to provide an analysis. Using single experts in a non-adversarial environment leads to lower costs and a more expedited process. Equally important, mediators who possess subject matter knowledge can help parties better understand the nuances of a disputed issue.
Let us look at each of these aspects in more detail.
1. The Use of Experts
Experts provide invaluable help in divorce mediation, untangling complex financial matters, and helping parties and the mediator better understand the issue. Divorce mediation is unthinkable without financial specialists. These are usually accountants who specialize in helping resolve complex divorce issues. Appraisers provide mediation with an accurate valuation of real estate, highly valued collections, and other valuable items. In addition, business valuators help determine ownership interest in a family business, while actuaries determine the assets’ present and future value. Some vocational experts can help evaluate the employability of one spouse (providing information on available jobs and salaries).
2. Mediation with Jointly Retained Experts
Each party hires an expert in litigation. The experts argue in an adversarial procedure, trying to convince a judge their expert opinion is more accurate. In mediation, both parties agree to retain a single expert from a specific field of expertise. They then use their findings to help them understand the disputed financial issue and continue negotiations. In a litigated divorce, parties aim to win the case at all costs and often paint their opponent badly. Distrustful of the opposing expert, they try to compromise their findings. Contrary to that, using the same experts in mediation helps reconciliatory efforts. The parties retain experts jointly, treating their opinions as neutral and factual.
3. Time and Cost-Effectiveness
Using jointly retained experts significantly lowers the costs and the length of the divorce process. Instead of hiring a separate appraiser, actuary, and tax expert, parties in mediation use joint experts, which automatically lowers the costs by half. In addition, mediation experts do not engage in time-consuming discovery – they seek and receive necessary information through informal communication with the spouses and their accountants.
4. Mediators with Subject Matter Experience
Lastly, family mediators possess the subject matter knowledge and experience necessary to deal with complex financial issues. Unlike state-appointed judges who lack financial knowledge, mediators bring the best of both worlds—they have divorce litigation experience (as family attorneys) and a deep understanding of financial matters. These skills help them navigate the process while effortlessly coordinating and communicating with various financial experts.
About Larry Hudspeth
A certified family law specialist, Mr. Larry Hudspeth has been a valued member of the North Carolina State Bar Board of Legal Specialization since 1989.
In addition to his decades-long family law attorney practice, Mr. Hudspeth is a North Carolina-certified family mediator—one of the first mediators in North Carolina certified in family financial matters.
Larry Hudspeth possesses both litigation experience and financial knowledge, enabling him to facilitate your negotiations and help divide complex financial assets in a non-adversarial and neutral environment.
Contact Larry Hudspeth
Call today at (910) 455-9921 to schedule your appointment.