Collaborative Divorce: A More Civilized Option

Pre-test for Co-Managing the Family Business

What happens to the mom-and-pop business when “mom” and “pop” file for divorce? Just because you and your spouse can’t resolve your personal differences doesn’t necessarily mean you can’t maintain a professional relationship.

If you own a private business, it’s probably the biggest asset in your marital estate. Many family businesses — especially small startups — depend on key people to stay afloat.

For example, a California vineyard relied on the wife (Daisy) for sales and bookkeeping and the husband (Donald) for field management and wine fermentation. If either person stopped being actively involved in the business, the small vineyard lacked the infrastructure to survive.

Donald was a great field manager and chemist but his temper made him impossible to live with. So, after ten years of marriage and five years of co-owning the business, Daisy contacted her lawyer about getting divorced.

She read an article about the collaborative process, and the couple decided to give it a shot. They figured collaborative divorce would be a good pretest to determine whether they could realistically work together after the divorce was final.

Through the collaborative process, Donald and Daisy learned that they could problem solve and fully disclose information at the personal level. It also convinced employees, bankers, suppliers and customers that they could put aside their personal differences and work together.

But Donald and Daisy realized that there might someday be limits to their co-management arrangement. In conjunction with their divorce settlement, they set up a buy-sell agreement that stipulated how a buyout would occur down the road.

After successfully co-managing the vineyard for another two years after divorcing, Daisy helped Donald find and train her replacements, a salesperson and a CFO. Then, Donald bought out her interest in accordance with the buy-sell agreement.

Today, the vineyard continues to thrive, because the owners were collaborative, despite their personal differences.

Unlike the traditional process that might pit spouse against spouse, collaborative divorce focuses on negotiation, cooperation and compromise. When you agree to collaborate — instead of compete — it can preserve time, money and dignity. And it’s not just for small marital estates. The wealthier a couple is, the more they stand to lose in lengthy courtroom battles and court-imposed settlements.

A Growing Trend

More than two decades ago, one divorce lawyer was fed up with the roadblocks his clients encountered during the traditional divorce process. After years of practicing family law, he was tired of lengthy, high conflict situations. In the end, former spouses often ended up hating each other, and many were disappointed by how the court had arbitrarily split up their assets.

So began the collaborative divorce movement, wherein the parties contractually agree to:

• Openly and honestly share information,
• Negotiate in good faith, and
• Settle their differences outside of court.

The only court appearance in a collaborative divorce occurs when the judge approves the uncontested, self-imposed settlement agreement.

Since it debuted, collaborative divorce has spread through the United States and Canada.

Upside Potential

Collaborative divorce attempts to create a win-win situation for both parties. If you and your spouse can commit to resolve your differences collaboratively, you may reap four major benefits:

1. Reduced costs. Legal fees are lower, because there’s only one court appearance at the end of the collaborative process. Both spouses hire their own attorneys, but they agree to share neutral financial and mental health advisers, which are paid out of community funds.
2. Faster resolution. Collaborating spouses agree to share financial information openly, eliminating the need for discovery and interrogatories. They also decide when and where to meet with their respective attorneys, rather than dealing with a court’s busy timetable. Settling the collaborative way typically takes less time and involves four-way conferences (between the spouses and their respective attorneys).
3. More control and flexibility. You can take an active role in the collaborative process, not a passive one.
4. Fewer hard feelings. With less bickering and distrust, you can set the stage for a positive, respectful relationship going forward. This can help if you co-parent children or co-manage a business after the divorce is final. People may also be more likely to comply with self-imposed settlements than with court-imposed ones.

Too Good to be True

Collaborative divorce isn’t for everyone. It only works when both spouses are seriouslycommitted to working together and completely honest. It involves taking more responsibility for your own settlement — rather than leaving it in a judge’s hands. Collaboration can’t work if one spouse intimidates the other or there’s an imbalance of power in the relationship, for example, in domestic abuse or fraud cases.

The biggest downside of collaborative divorce can occur when the parties start down the collaborative path and fail. If either party seeks legal action or a stalemate occurs, the collaborative process ends. Then, costs increase as the couple get their attorneys and financial experts up to speed and embark down the traditional divorce route.

An Honest Appraisal

You know yourself — and your spouse — better than anyone else. Can you realistically set aside personal differences to settle your financial and parenting issues? Or do you harbor too much resentment and anger to truly collaborate? If you think the collaborative process might work for you, ask your attorney about the process.

© 2017