Divorce in the Red Zone

Clear analogies exist between the Red Zone in football and red zones in divorce. As in football, successful navigation of the divorce process is often dependent upon the quality and extent of the knowledge upon which the divorce is based, the anticipation and thoroughness of the preparation, the ability to adapt to change, and the nature of the execution within these stages.

In cases involving divorce financial planners, red zones are also legal and financial coordination points between the attorney and the planner ' the latter bringing a broad financial perspective to the case that compliments the attorney's legal perspective. Having a second set of eyes actively engaged in the process can potentially also lead to insights that might otherwise be overlooked. To extend the football analogy further, in a well-functioning attorney/divorce financial planner team, the attorney typically assumes the role of head coach and the divorce financial planner “assistant financial coach” or “financial coordinator.”

The Preliminary Conference Red Zone

Even if there is no sense of urgency and no immediate pressure being brought to bear, the moment a client signs an engagement letter a red zone is entered. In my opinion, what happens at this juncture can have a profound impact on how the case will evolve. If there does not appear to be an immediate need for judicial intervention and its imposed deadlines, the tendency might be to give the case low, short-term priority and focus attention instead on unrelated and seemingly more urgent matters. The Preliminary Conference Red Zone, however, is an extremely critical phase of the process. If a case during this phase is not given the attention it deserves, its deferred sense of urgency can become increasingly critical as the process proceeds. This cycle of deferral and urgency can and should be broken, and a skilled financial coordinator can be a valuable asset in helping keep a case on track.

Although the early stages of the divorce process appear to represent an opportunity to quickly and inexpensively settle a case, attempting to do so this early in the process does not come without risk. It is advisable that prior to initiating discussions with the opposing side, a preliminary assessment of the various parameters be made. The attorney needs to be comfortable enough with this assessment to make an initial decision about how best to proceed. Aside from having limited and sometimes erroneous information about the parties ' the stories the parties tell about their marriages are sometimes so different you would think they were talking about different marriages; also, the client is often so intent on earning the attorney's strong advocacy, there may be a tendency to stretch the truth ' the attorney's initial knowledge of the financial parameters will often also be limited.

If a divorce financial planner is involved in a case at this early stage of the process, the planner can be a good resource or financial sounding board to help the attorney make this determination.

Unless it is clear that the case will be easy to settle or that financial resources are limited, I recommend, irrespective of whether judicial information is formally requested, that preparation for a Preliminary Conference begin in earnest. Doing this will front-load some of the work that will typically be done later in the process, so it will increase short-term costs. But this work will likely need to be done anyway, and this will help get the case off to a running start. It will also facilitate work associated with red zones that normally occur later, as well as overall preparedness for unanticipated red zones that may suddenly arise.

In some cases, one of the parties may need to make application for temporary support or legal or expert fees. Although the attorney will usually not have a complete understanding of the relevant financial parameters at this time, he or she may still need to prepare for arguments associated with them.

Unanticipated Red Zones

Requests for temporary support and fees are effectively red zones within a red zone. The more information that has been gathered, the better preparation for this can be.

Since unanticipated red zones can also arise, a general rule of thumb should be to do as much upfront preparation as possible. The client should be extensively interviewed, all available financial information collected and preparation of the Statement of Net Worth actively initiated. Although more formal discovery requests will probably be made later in the process, the client should provide the attorney with as complete a set of financial documents as possible, and these documents should be carefully reviewed. It is important also to learn the client's wishes and expectations for the eventual outcome of the case, even if seemingly unrealistic or subject to change. Spending time with the client at this time will also be a first opportunity to evaluate how the client might act if required to testify in court, i.e. , whether the client will make “a good witness.”

With a broad background in personal finance, the divorce financial planner can be a valuable asset in this initial information collection process. In addition, the planner will likely have access to software that can be easily updated as information becomes available. The divorce financial planner can also do a detailed comparative analysis of recent tax returns, if available, as these are often great sources of insightful financial information.

It is often also useful to have the client begin developing a bookkeeping record of past and current cash flow. This exercise helps make the client better attuned to the underlying financial details of the pre-divorce marital lifestyle. This understanding can potentially result in better decision-making during settlement negotiations. In addition, insights derived from preparing this record can potentially help the client develop a realistic post-divorce budget once the divorce has been finalized.

Although it may be possible to download data directly from credit card and bank accounts into a money management program such as Quicken, I generally do not recommend direct downloading, especially in the early stages of the divorce process. This is because manual data entry by the client generally gives rise to a more powerful understanding of the pre-divorce lifestyle.

The Preliminary Conference marks the end of this stage and sets the agenda for the remainder of the process. The Statement of Net Worth, which will be exchanged prior to or at the Preliminary Conference will probably be based upon an incomplete set of facts and may therefore contain some inaccuracies. To minimize errors and omissions, it still needs to be carefully prepared, studied and analyzed.

If the above course of action is followed, the attorney should be able to enter the Preliminary Conference with a good understanding of potential discovery needs. The attorney should also be prepared to narrow the focus of the divorce to those issues that will require further analysis and consideration. Once the parties have reached agreement on specific issues at the Preliminary Conference, these issues will be difficult to revisit. The Preliminary Conference will also be an opportunity to introduce the client and the client's perspective on the case to the court. This is very important, as first impressions can have a lasting impact on how the case will be perceived and prosecuted.

In next month's issue, we will discuss the Discovery, Pre-Trial and Trial Red Zones.

Carl M. Palatnik, CFP', CDFA, a member of this newsletter's Board of Editors, is a Certified Financial Planner and Certified Divorce Financial Analyst. He is president of Divorce Analytics, Inc., a provider of divorce analytical services, with offices throughout Long Island and the New York metropolitan area, and founding president emeritus of the Association of Divorce Financial Planners, an international not-for-profit professional association. He can be reached at [email protected] or at 631-470-0331.

Clear analogies exist between the Red Zone in football and red zones in divorce. As in football, successful navigation of the divorce process is often dependent upon the quality and extent of the knowledge upon which the divorce is based, the anticipation and thoroughness of the preparation, the ability to adapt to change, and the nature of the execution within these stages.

In cases involving divorce financial planners, red zones are also legal and financial coordination points between the attorney and the planner ' the latter bringing a broad financial perspective to the case that compliments the attorney's legal perspective. Having a second set of eyes actively engaged in the process can potentially also lead to insights that might otherwise be overlooked. To extend the football analogy further, in a well-functioning attorney/divorce financial planner team, the attorney typically assumes the role of head coach and the divorce financial planner “assistant financial coach” or “financial coordinator.”

The Preliminary Conference Red Zone

Even if there is no sense of urgency and no immediate pressure being brought to bear, the moment a client signs an engagement letter a red zone is entered. In my opinion, what happens at this juncture can have a profound impact on how the case will evolve. If there does not appear to be an immediate need for judicial intervention and its imposed deadlines, the tendency might be to give the case low, short-term priority and focus attention instead on unrelated and seemingly more urgent matters. The Preliminary Conference Red Zone, however, is an extremely critical phase of the process. If a case during this phase is not given the attention it deserves, its deferred sense of urgency can become increasingly critical as the process proceeds. This cycle of deferral and urgency can and should be broken, and a skilled financial coordinator can be a valuable asset in helping keep a case on track.

Although the early stages of the divorce process appear to represent an opportunity to quickly and inexpensively settle a case, attempting to do so this early in the process does not come without risk. It is advisable that prior to initiating discussions with the opposing side, a preliminary assessment of the various parameters be made. The attorney needs to be comfortable enough with this assessment to make an initial decision about how best to proceed. Aside from having limited and sometimes erroneous information about the parties ' the stories the parties tell about their marriages are sometimes so different you would think they were talking about different marriages; also, the client is often so intent on earning the attorney's strong advocacy, there may be a tendency to stretch the truth ' the attorney's initial knowledge of the financial parameters will often also be limited.

If a divorce financial planner is involved in a case at this early stage of the process, the planner can be a good resource or financial sounding board to help the attorney make this determination.

Unless it is clear that the case will be easy to settle or that financial resources are limited, I recommend, irrespective of whether judicial information is formally requested, that preparation for a Preliminary Conference begin in earnest. Doing this will front-load some of the work that will typically be done later in the process, so it will increase short-term costs. But this work will likely need to be done anyway, and this will help get the case off to a running start. It will also facilitate work associated with red zones that normally occur later, as well as overall preparedness for unanticipated red zones that may suddenly arise.

In some cases, one of the parties may need to make application for temporary support or legal or expert fees. Although the attorney will usually not have a complete understanding of the relevant financial parameters at this time, he or she may still need to prepare for arguments associated with them.

Unanticipated Red Zones

Requests for temporary support and fees are effectively red zones within a red zone. The more information that has been gathered, the better preparation for this can be.

Since unanticipated red zones can also arise, a general rule of thumb should be to do as much upfront preparation as possible. The client should be extensively interviewed, all available financial information collected and preparation of the Statement of Net Worth actively initiated. Although more formal discovery requests will probably be made later in the process, the client should provide the attorney with as complete a set of financial documents as possible, and these documents should be carefully reviewed. It is important also to learn the client's wishes and expectations for the eventual outcome of the case, even if seemingly unrealistic or subject to change. Spending time with the client at this time will also be a first opportunity to evaluate how the client might act if required to testify in court, i.e. , whether the client will make “a good witness.”

With a broad background in personal finance, the divorce financial planner can be a valuable asset in this initial information collection process. In addition, the planner will likely have access to software that can be easily updated as information becomes available. The divorce financial planner can also do a detailed comparative analysis of recent tax returns, if available, as these are often great sources of insightful financial information.

It is often also useful to have the client begin developing a bookkeeping record of past and current cash flow. This exercise helps make the client better attuned to the underlying financial details of the pre-divorce marital lifestyle. This understanding can potentially result in better decision-making during settlement negotiations. In addition, insights derived from preparing this record can potentially help the client develop a realistic post-divorce budget once the divorce has been finalized.

Although it may be possible to download data directly from credit card and bank accounts into a money management program such as Quicken, I generally do not recommend direct downloading, especially in the early stages of the divorce process. This is because manual data entry by the client generally gives rise to a more powerful understanding of the pre-divorce lifestyle.

The Preliminary Conference marks the end of this stage and sets the agenda for the remainder of the process. The Statement of Net Worth, which will be exchanged prior to or at the Preliminary Conference will probably be based upon an incomplete set of facts and may therefore contain some inaccuracies. To minimize errors and omissions, it still needs to be carefully prepared, studied and analyzed.

If the above course of action is followed, the attorney should be able to enter the Preliminary Conference with a good understanding of potential discovery needs. The attorney should also be prepared to narrow the focus of the divorce to those issues that will require further analysis and consideration. Once the parties have reached agreement on specific issues at the Preliminary Conference, these issues will be difficult to revisit. The Preliminary Conference will also be an opportunity to introduce the client and the client's perspective on the case to the court. This is very important, as first impressions can have a lasting impact on how the case will be perceived and prosecuted.

In next month's issue, we will discuss the Discovery, Pre-Trial and Trial Red Zones.

Carl M. Palatnik, CFP', CDFA, a member of this newsletter's Board of Editors, is a Certified Financial Planner and Certified Divorce Financial Analyst. He is president of Divorce Analytics, Inc., a provider of divorce analytical services, with offices throughout Long Island and the New York metropolitan area, and founding president emeritus of the Association of Divorce Financial Planners, an international not-for-profit professional association. He can be reached at [email protected] or at 631-470-0331.