Why is it important to include a financial neutral within your collaborative divorce process?
A collaboratively trained Financial Neutral does far more than collect documentation of, and provide taxation education regarding, your assets (such as real estate, businesses, non-retirement investments, retirement plans) and debts. The Financial Neutral helps each spouse create a budget or cash flow prediction. This analysis paints for each family a picture of moving from one household to two, so everyone can understand what it will take to establish and maintain financial independence. Furthermore, an experienced Financial Neutral brings balance to what in many cases is the parties’ unbalanced understanding of finances. A financially inexperienced spouse will be faced with a myriad of challenges and questions regarding his/her future financial well-being. To support the transition from one household to two, each spouse must feel confident that his/her financial needs will be met. To move forward, he or she must also achieve a comfort level with how independence will look and what changes, if any, must be made. As part of the collaborative professional team, these essential tasks are performed by the Financial Neutral at a lower hourly rate than having both attorneys perform these tasks. As a safeguard against any illusion of non-neutrality, the Financial Neutral is prohibited from working with either client in a financial capacity after process concludes. The essence of the Collaborative process is to enable you and your spouse to create your own fully informed solutions to the challenges facing your family. Unlike a non-Collaboratively trained financial professional, a Collaborative Financial Neutral is there to help assist the entire team, including both spouses, generate options and create “what if” scenarios without dictating a specific outcome.
What can a financial neutral contribute to a collaborative divorce?
Cash Flow Assistance
Determine and/or assess current budgets; and help create post-divorce budgets
Identify sources and amounts of income; and explore alternative allocations of income resources
Explore feasibility of a spouse retaining the marital residence
Evaluate health/life insurance needs
Provide guidance to the spouse less experienced in managing household finances regarding various cash flow and other financial decisions, such as:
- Health insurance
- Home purchase v. rent
- Car purchase v. lease
- Other decisions that the spouse less experienced in managing household finances has not previously had to consider
Gather financial data; assess current and changing values of assets and liabilities
Assess, and then educate team about, income tax implications of various scenarios and options
Convey implications of possible bankruptcy and/or foreclosure and/or short sale proceedings
Identify potential short-term and long-term risks of property division
Help identify future financial goals
Deliver a broad base of financial knowledge to the table
Establish and maintain a greater level of trust within the collaborative team, making it easier to gain information and explore options