The role of negotiations in a Texas divorce

Originally published by The Law Office of Bryan Fagan, PLLC Blog.

Do you feel like you can talk to your spouse about important issues? Odds are if you are reading this blog post about divorce on a family law attorney’s website, the answer to that question is no. You may be of the same opinion as many people who are going through a divorce: that their spouse is someone who they feel that they will never again be able to talk to or relate with. Communication, it goes without saying, can be a huge barrier to being able to having a successful marriage.

Here is the part of today’s blog post where I share with you some information that may come as a surprise. Most divorces in Texas never see the inside of the courtroom. That’s right- the image in your mind of you and your ex-spouse yelling at one another over the banging gavel of the judge is likely to be just that- an image in your mind.

Most Texas divorces settle in mediation or in informal settlement negotiations. Mediation is where you and your spouse select a third-party attorney to help you all negotiate a settlement agreements. Many folks going through a divorce will go to multiple sessions of mediation during a divorce case. The first session will occur before a potential temporary orders hearing, and the second mediation session will occur before your case is scheduled for a trial.

If you can reach a settlement (even a partial settlement) a Mediated Settlement Agreement (MSA) will be drafted by the mediator which reflects the nature of your settlement. One of your attorneys will then be selected to take those agreements and draft an order- temporary or final- for you and your spouse to live by. You cannot go back on your word or attempt to change what is included in the MSA. Waking up the next morning and frantically calling your attorney to tell him that you are having second thoughts about your settlement will do you no good.

A huge part of being able to successfully negotiate with your spouse- a person with whom you are likely not that happy with at the moment- is preparation. In yesterday’s blog we discussed how organization and being intentional with your actions during a divorce are both keys to your success. Today we will continue to discuss themes related to preparedness, organization and intentionality. This time we will do with within the context of negotiations with your spouse.

Know the situation and know what you don’t know 

Wandering through your divorce is not a good plan. In fact, it’s not really a plan at all. Yes, you have likely hired an attorney. Yes, he or she will do their best to guide you through the case and to help you make good decisions. Hopefully you will have selected an attorney who has the heart of a teacher so that not only will you know things about your case but that you will understand the “why” that accompanies every decision made in your divorce case.

Every divorce case has different phases. You need to know where you are in your case so that you can negotiate better with your spouse. Your attorney will help you on this part, as well, but if you are hammering your spouse on what you are going to do with the house- and your case is barely a week old- then you are losing out on the opportunity to negotiate and discuss more relevant issues to your current phase of the case. You’ll get to the house- just not after one week in the divorce.

Before you even begin to negotiate, here are the questions that you need to ask yourself:

Assets and debts are two subjects that you need to be knowledgeable of. I have represented clients on either ends of the “knowledge spectrum” when it comes to personal finances for the family. Some folks are the one in the marriage who pays the bills, tracks the budget, keeps up with the investments and is generally the more “accountable” spouse when it comes to issues related to money.

On the other hand we have spouses who take a backseat on these issues and let the other spouse do the driving. These folks usually have little to no interest on issues related to money. It could also be that their spouse has, on purpose or by accident, made it very difficult for he or she to gain access to the family finances. This is not a good thing and can significantly hamper that spouse from getting a feel for an important area of their lives.

One basic concept that you need to be knowledgeable of is that during the course of your marriage, both assets and debts were obtained by you and your spouse. An asset is anything that has a positive monetary value. Investments, retirement accounts, bank accounts, personal property, vehicles, etc. would all count as assets. Debts are things like credit card balances, student loans, mortgages, car notes, personal loans and other things of that nature. Your assets minus your debts equals your personal net worth.

You need to know where you stand with your net worth, your assets and your debts before you ever begin to negotiate with your spouse about any subject related to your divorce. Your personal finances impact every area of your life- even issues related to your children. Without knowledge of what household bills are, what your debt share is going to be and how much income you need to run a household, you wouldn’t be able to negotiate well for child support, spousal maintenance or anything else in your case.

Know what your community estate looks like before it is time to negotiate

The same rule applies to your community estate as I just discussed with you concerning your assets and liabilities. You cannot possibly negotiate well when it comes to the division of your community estate unless you actually know what is considered to be community property in your divorce.

If you need to know more about the state of your family’s finances then your attorney should submit discovery requests upon your spouse. That means he will need to turn over to you information, answers to questions, and documents related to your family’s finances. If you have been left in the cold for much of the marriage when it comes to personal finances this is especially helpful and necessary.

At the beginning of a Texas divorce it is customary to exchange a list called an inventory/appraisement with your spouse. An inventory and appraisement lists what each party believes to be the state of the family’s finances in terms of property owned. Each item of property should be listed along with the spouse’s estimated value for that property. You should submit this to your spouse, and he to you, prior to mediation. That way you will know what assumptions your spouse is making when settlement proposals are being made.

Both methods- an inventory/appraisement and well as formal discovery requests- should be made in your case. One will give you a generalized idea of what is happening in your family’s finances and the other will give you a more detailed perspective. Negotiations regarding the finances of your family without these crucial steps being taken care of are destined to not be successful.

What to do if you, your spouse or both of you own a business?

If either you or your spouse are the owner of a small business, that is a factor that could complicate your divorce a great deal. The key part of negotiations on a business is determining a value for that business. There are multiple methods to estimate the value of a business. I do not have the space to go over those methods here, but we do have prior blog posts that can guide you in this area if you are interested.

What you need to know for today’s blog post is that you need to get a professional to come into your case and provide a detailed, objective analysis on the value of that business. There is no real way to divide up an asset like this fairly unless you have a professional come in and help you determine its value. Again, negotiations cannot be fair when one (or both) of you is not knowledgeable about the actual value of the asset you are negotiating upon.

After you have a good estimate of what the business is worth, you next need to determine what is going to happen with the business after the divorce. Like the family home, there are a number of different options that you and your spouse can negotiate on when it comes to determining a fate for the family business.

One option would be to have the spouse who runs the business keep it and to pay the other spouse in other community assets an equal amount of the value for the business. Let’s say that the business is appraised to be worth $500,000. If the whole of that value is community property, you could be paid $250,000 in other property in order to allow your spouse to remain the owner and operator of the business. Everyone wins in that case.

Next, the business could be sold and the proceeds from that sale could be split proportionately between you and your spouse. This would mean two things: that you would need to negotiate on the percentage split that each of you stand to receive out of the sale and you would need to find a willing buyer for a business. This is not always easy to do-especially during a relatively short period like a divorce. If you and your spouse both are involved in the business and you have decided that it is just not tenable for both of you to remain involved together, this may be the best option for you to take advantage of.

The last option that I wanted to discuss with you today would be to maintain ownership of the business between the two of you, and operate moving forward as 50/50 partners. If you absolutely cannot find a buyer for the business, absolutely want the business to stay in the family or simply cannot part with the business this is an option to consider.

Many times I find that spouses who work well together but just do not want to be married any longer can find success in this option. I would advise that you do some thinking about how working with your ex-spouse would impact both the profitability and the day to day operations of a business. If you think running the business with your ex-spouse could somehow harm the business then I would think twice before selecting this option.

Your business is likely to be a huge part of your overall net worth

If you own a business that is fairly sizeable (as in, you own real estate, have employees, own equipment associated with the business) then it is likely that your business represents (along with your home and other investments) a huge slice of your net-worth pie. As a result, you may not own other property that could fairly pay your spouse off for giving up their share of the business to you.

If this is what you are facing, then you may need to agree to pay your spouse in installments over the course of many years in order to pay them their fair share of the business. Or, you could agree to pay him or her spousal maintenance for a set period of time until the value is paid in full.

Stay tuned tomorrow for more tips on negotiation

We will pick up tomorrow right where we left off today by discussing more ways to intelligently negotiate with your spouse during a Texas divorce. If you have any questions about the material that we covered today please do not hesitate to contact the Law Office of Bryan Fagan. Our licensed family law attorneys offer free of charge consutlations six days a week here in our office. These consultations are a great opportunity for you to ask questions and receive direct feedback about your particular circumstances.

Curated by Texas Bar Today. Follow us on Twitter @texasbartoday.

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