WE HELP FAMILIES RESOLVE CONFLICT PEACEFULLY


Tuesday, August 20, 2019

Respect the Team

One of the principles of collaborative law is a team approach to joint problem solving.  The team approach to joint problem solving has numerous advantages:
  • We're smarter together: each team member brings a different background and expertise to the team.  As the saying goes, a jack of all trades is a master of none.  On a team, each person can be a master of their trade and rely on others for the knowledge they can't individually maintain.  In addition, as humans, professional team members sometimes make mistakes.  When we are open to feedback from other professionals, there is a greater chance that mistakes are minimized and corrected, ultimately offering a better service or product to the clients.
  • We're better together: each team member brings different experiences to problem solving.  Our experiences shape our ability to empathize and be creative in problem solving.  Having different experiences at the table increases the likelihood of spotting biases that could limit our creativity.  For example, on a divorce case it can be helpful to have some team members who have experienced divorce themselves, as they may be better able to identify with and explain some of the feelings that a client is expressing.  Understanding is an integral step in finding resolutions that truly match the priorities and goals of each participant.
  • We're stronger together: each team member is a resource for other team members in addition to being a resource to the clients. Difficult problems are not just draining on the resources of the clients, they can be draining on a professional team as well.  The professionals are just as human as the participants and sometimes we have issues in our lives that are triggered by the case we're working on.  When a professional team supports each other, we increase the ability for everyone to process their emotional reactions effectively and focus on joint problem solving.
  • We're faster together: each team member's ability to focus on their area of expertise allows multiple projects to move forward simultaneously.  While it may seem counter-intuitive that problem-solving is faster with more voices in the mix, when a team works together, effective delegation and coordination can make problem-solving more efficient.  In a collaborative divorce case, for example, it is possible for the parties to work with the coach on parenting issues, while at the same time the financial neutral and attorneys are making sure that the financial documentation is processed and appropriate scenarios generated. 
The key to all of this working is to recognize the strengths and weaknesses of each team member and to respect the value of every team member.  This is just as true in collaborative law work, as it is in any other team setting.  At Skylark Law & Mediation, PC we rely heavily on the strengths and unique experiences of each of our team members.  

It is all too common, unfortunately, for some people to be dismissive or rude to an administrative staff member, thinking that the person who answers the phone is not as important as the attorney or mediator working on their case.  What that person doesn't understand is that every member of the team is an integral part, who controls different pieces of the puzzle.  The clients who recognize the value of the team, benefit by lower costs because they spend less time with their attorney and mediator, using the full team for the strengths of each member.  

Being rude, disrespectful, or dismissive to any one team member is likely to cost a client more in the long run, and ultimately minimizes the potential benefits outlined above.  It's both polite and in your own best interest to respect the full team.  

If you're interested in learning more about collaborative practice consider attending the upcoming Introduction to Collaborative Law Training from the Massachusetts Collaborative Law Council, or reading this article: Improving Negotiations using Collaborative Values: A Checklist of Tools.


Tuesday, August 6, 2019

When Dividing Retirement Accounts in Divorce the Division Date Matters

There are a number of questions that must be answered when dividing a retirement account in a divorce.  Divorcing couples are often focused specifically on the amount or percentage of the account funds that they are dividing.  It is also important, though, to identify the date of that division, and whether investment changes are included or not.  This information is necessary because dividing a retirement account is not as immediate as dividing a liquid asset.

Dividing a retirement account in divorce requires a special court order (usually called a Qualified Domestic Relations Order or QDRO).  The process of obtaining and implementing one of these orders is not immediate, and requires approval by both the court and the plan's administrator.  During this time, the account will change value.  Accounts change in value due to market fluctuations, but also due to withdrawals, loans, and ongoing contributions.  All of these changes can create havoc with a division if a clear date of division is not identified.

Consider just this simple division example:

Pat and Chris agree to divide Pat's 401(k) with Chris receiving 50%.

They don't specify the date of division, but they sign their agreement on January 2, 2019.  Due to the divorce process timelines in Massachusetts their hearing date on a Joint Petition for Divorce is February 4, 2019.  Their Judgment of Divorce Nisi issues on March 6, 2019, and becomes final on June 4, 2019 (their legal divorce date).  They just hired their QDRO drafter (on April 1, 2019) and estimate that the time from starting their QDRO drafting to having it implemented will be approximately 4 months (for drafting, pre-approval, court approval, final approval, and implementation), with an estimated transfer of funds on August 1, 2019.

The following are the changing values in the 401(k)

January 2, 2019: $400,000
February 4, 2019: $410,000 (from 1/2/19 contributions of $1,000, approx. investment gain of $9,000)
March 6, 2019: $425,000 (from 1/2/19 contributions of $2,000, approx. investment gain of $23,000)
June 4, 2019: $436,000 (from 1/2/19 contributions of $10,000, approx. investment gain of $26,000)
August 1, 2019: $438,000 (from 1/2/19 contributions of $14,000, approx. investment gain of $24,000)

Pat has continued to contribute to the account, and investments caused a surge in the Spring, but there have been some losses in investments in July.  Now consider the different resulting distribution of funds on August 1, 2019 depending on which date of division is chosen:

Date of Valuation Including Investment Changes Excluding Investment Changes
Pat Retains Chris Receives Pat Retains Chris Receives
Date of Agreement (January 2, 2019) $226,000 $212,000 $238,000 $200,000
Date of Hearing (February 4, 2019) $225,500 $212,500 $233,000 $205,000
Judgment of Divorce Nisi (March 6, 2019) $226,000 $213,000 $225,500 $212,500
Judgment of Divorce Absolute (June 4, 2019) $221,000 $217,000 $220,000 $218,000
Date of Transfer (August 1, 2019) $219,000 $219,000 $219,000 $219,000


*For demonstration purposes I've used round numbers, but there would be some additional differences due to the investment gains or losses on the contributions made between January 1, 2019 and August 1, 2019, and that would change these figures slightly as well.

In this example, Chris receives more of the account if all the contributions are included (a later date of distribution), and in most cases a greater resulting amount if investment gains are included as well (except when using June 4, 2019 because of the dip in investment values in July).  A later date of valuation is obviously better for Chris, but is it fair?

Pat may not feel it is fair to share the contributions after a certain time period, and the risk only increases to Pat if the QDRO process is delayed for any reason and the transfer date becomes later than August 1, 2019.  What is fair is always subjective, and one of the benefits of a set valuation date (regardless of which date) is that it gets ride of any motivation by Chris to delay the QDRO process.  

When sharing investment gains, Pat and Chris share the same risk and benefit of an increasing or decreasing market and for these reasons most divorcing couples choose to share the investment gains and losses, and to set as specific date of valuation.  While there may be reasons in some cases to vary from what is typical, it is important that everyone  understand these risks and benefits so they can make an informed decision.  

As QDRO preparation experts and consultants the staff at Gray Jay Endeavors, LLC wants their customers to provide clear direction for the drafting of the QDRO, preferably in their divorce agreement itself, so there is no chance for later disagreement if the market changes or the QDRO is delayed due to unforeseen circumstances. Many experts, like Gray Jay, will also assist in reviewing or drafting Agreement provisions related to retirement to ensure that all these issues are addressed.

Guest Post from Gray Jay Endeavors, LLC







Related Posts Plugin for WordPress, Blogger...