As a family lawyer, I see accountants, financial planners and commercial lawyers as playing key support roles when negotiating an outcome for clients who are separating. Accountants and planners often have long standing relationships with the parties involved, so are well-positioned to be able to give instructions to lawyers about an asset pool. They are also in a good place to reality test the client’s position and provide a realistic expectation about the how the pool can be split.
Understanding the types of negotiation
When it comes to negotiation in family law matters there are typically three stages when negotiations occur. These include initial discussions, structured negotiations in the form of mediation and negotiations that occur just prior to the case being dealt with by a court.
The less formal negotiations between the lawyers from each party are the starting point in most cases. This is often where a lawyer is looking to see what the attitude of the other party is, particularly as to whether they have realistic or unrealistic expectations.
Following this, there are more structured negotiations, often progressing to mediation. In about 80% of the cases I see, the matter is resolved by the mediation stage. Of the remaining 20% that go beyond mediation, less than 1 in 20 actually require a determination by a judge. This is because a large number of cases settle on what we call, ‘the door of the court’.
Providing certainty around the outcome
The most significant benefit in negotiating an outcome, aside from the obvious savings in legal fees is the certainty of outcome. As soon as you go into the Court, the judge provides the outcome and it might not be what either party hoped for or expected.
Since a Judge is only there to determine an outcome, they are limited by a process about the pool and division of the assets. So they will typically not take into account things such as tax planning and structuring – which could be considered when a lawyer works together with a client’s accountant or financial planner to settle outside of the Court.
For example, if a matter goes to Court, a husband who owns a business might be ordered to pay the wife $1m within a 90 day period. However, when negotiating an outcome, it might be acceptable to say the husband could pay $300,000 within 30 days and then $100,000 each quarter, plus interest, for the next six quarters (with some security). Meaning, in this case, the husband could avoid needing to have a ‘fire sale’ on his business to fulfill the settlement orders.
Stressing the benefits of certainty of outcome and a tailor made solution is where accountants, commercial lawyers and financial planners can assist their mutual clients.
How trusted advisors can make all the difference
When two parties have heightened emotions following a breakup, concerns around honesty and integrity in negotiation arise. For example, both parties might consider that the expected outcome of a property division might be in the range of a 60-65% split of the pool to one party, but in their opening offer, they might come asking for 80%. This offer is based on the thinking that their opening offer gives them more leeway to make concessions to move to say, 70%. But in reality, even 70% may never be considered in the range. In this instance, they have started the negotiation from an ambit position which typically leads to positional bargaining.
It is ideal that negotiations start off with an understanding of a realistic range of outcomes. This way the person who is in receipt of the offer can properly assess the genuineness of the other party’s offer.
Honesty and integrity around this can be helped by the approach of the accountants, planners and lawyers who are advising the client. When you are a trusted advisor who has been working with the party for say, 15 years, you have the opportunity of knowing the long history with the client so can be a voice of reason. This may involve ringing the lawyer acting for your client and asking them how you can assist with the lawyer providing realistic advice about the range of outcomes.
A good lawyer going into a negotiation, typically a mediation, will provide a client with a risk analysis. The lawyer will advise that they think the range of likely outcomes as a percentage of the total asset pool based on the information that their client says is correct and the pool as the client sees it. The lawyer should also look at providing advice based on the the information that the other side says is correct and the pool as the opposing client sees it.
As a family lawyer, I find it is important that my client understands what the percentage difference in the outcomes means in dollar terms. Often clients will go to mediation set on a percentage but they really don’t understand what the difference is in finances. The risk analysis gives the client a cost vs benefit insight.
There are no winners and losers
When it comes to family law, typically there is no winner and no loser in a negotiated outcome. You are negotiating towards an outcome you can live with, which usually will not be the best outcome or the worst outcome. Rarely would a client walk away saying ‘I have won’. Instead, they walk away with an outcome that is complete and allows them to get on with their life and not having to deal with lawyers for the long term.
In the risk analysis, we talk about the non-financial costs of going further with a matter, which includes the fact that ongoing property litigation will affect all your other relationships. While there are people who thrive on litigation, in 35 years as a lawyer, I have never had a trial conclude where a Judge made the decision and have that client say ‘that was great, let’s do it again’.
If a client believes that litigation is a good idea because their ex-partner will be put before the Court detailing all the wrongs in the relationship – think again. It is a difficult process and one that if it can be avoided through mediation, then that would be encouraged.
I am finally going to get my day in court
Just because a client has been allocated a date for a final property hearing, this does not mean that it will be finished on that day. Courts have a system called ‘over-listing’ as they know many matters will resolve often just before entering the Courtroom. A Judge might have three listings on the same day because there is a likelihood some of them will not go ahead. If you have property only trial, it is quite common to turn up and one of the other matters listed is a parenting matter, which is automatically given priority over any property litigation matters. If there were three property matters listed for the one day, all three matters will not be able to be heard on that day so the Judge will adjourn those that cannot be heard on that day, to come back again in six months.
I had this recently with a case and the parties resolved that day because despite waiting two years in the system, they were faced with a six month adjournment. If they hadn’t resolved that day, they would have been facing additional costs to update the trial material, as well as further barrister fees. It was in their best interests to come to an agreement and a satisfactory conclusion.
As a family lawyer, I’ve quite often met a client only a few weeks or months prior to providing them advice. When I am sharing information with them and they are not entirely happy with the advice because they thought they could have entitled to a larger share of the pool. However, when they can turn to their accountant who they have trusted for years, who can give them more assurance around the best way to approach the separation of assets, with an understanding of how property settlements tend to play out, they may be more accepting of our advice. If you as accountants or financial planners can be an informed supporter in the process, then our mutual clients have the best opportunity to resolve their matter most effectively.
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