Clean Break

Underlying the problem of dividing assets is the assumption that each asset up for grabs—each piece in a divorcing couple’s asset pie—has a specific value. As the lawyers prepare to squabble over these assets on behalf of their clients, they try to establish a framework for the negotiations by taking a position on the value of each asset.

So far, so good, in theory at least. But the theory depends on unanimous agreement on the value of each asset: The house is worth X, the car is worth Y, and the purebred Shih Tzu is worth Z.

Alas, such crystal-clear, indisputable facts simply can’t exist in the midst of a divisive and combative emotional crisis where there is no reality, only perception. When matrimonial lawyers try to get resolution on perceptions, a case can drag on for years and years.

Emotions turn the asset pie into a muddy mess, and the ensuing debate over values and equitable division is usually long, costly, and vicious.

In the alternative divorce developed by Fairway Divorce Solutions, a true picture of the asset pie—the sum of all assets and their agreed-upon values—is established right up front. Input on the value of each asset is obtained from both parties. Only when mutual agreement has been reached on the value of every asset in the pie do the “who gets what?” negotiations get underway.

Once fixed values have been assigned, dividing up the asset pie efficiently and equitably is usually a piece of cake!

This rock-solid process ensures a fair division of assets without the mudslinging, backstabbing, and lifelong resentments that often come with divorce in the traditional system.

For example, let’s say the wife wants the dog. How much is a Shih Tzu really worth? Her lawyer will argue it’s not even worth the $450 they paid for it; it is, after all, getting on in years, and it never fulfilled its promise as a prizewinner.

His lawyers, meanwhile (eager to acquire the largest possible trade-off), will position it as practically priceless: Just think of all the training and grooming and veterinary costs invested on its behalf. Of course, they also know she loves that dog dearly and wouldn’t part with it for anything in the world. (Well, almost anything.)

The traditional system of divorce revolves around (and around and around) what I refer to as “position bargaining.” In this reactive, defensive posturing, the opposing parties take positions on the value of particular assets and then maneuver to ensure they get what they want. The process amounts to little more than asset grabbing, which looks a lot like preschool children fighting for the same toy in the toy box.

Position bargaining pays, but only if you’re a lawyer. For the rest of us, it’s a terrible drain of money and time.

What’s worse, position bargaining typically prevents participants from seeing other, often better solutions that could, over the long term, put more money in their pockets.

Some mediation and collaboration can foster a similar “me against you” attitude, and they usually lack the pragmatic methodology needed to bring about equitable resolutions.

Lawyers thrive on ambiguity, and ambiguity thrives in traditional divorce proceedings. Assets just simply seem to change value as they move from one person’s column to the other’s. Of course this does not make sense but that is exactly what happens.

Sally says she wants the house. She puts a price on the house. Then, based on that price, she and her lawyer begin to bargain with her husband and his lawyer.

There are many problems with this approach, not the least of which is the possibility that Sally cannot even afford the house. All too often in divorce, people’s actions (or reactions) spring from emotional attachments to an asset. (“But this house is where I raised my children,” explains Sally. “It’s filled to the brim with happy memories.”) The problem here is easy to see: Emotional attachment is driving a financial decision about an asset that will likely have an inflated price tag because the other party recognizes how important it is to Sally.

Herein lies the major flaw with position bargaining. Values, which have no business being anything but fixed, become dynamic.

When Sally announces she wants the house, her husband and his lawyer say, “Fine. It’s worth $475,000. Now we want an equal allotment of assets in return.”

“Actually,” say the wife and her lawyer by way of a letter after several days of serious deliberation, “you can have the house. We’ve decided we want the cottage and the retirement savings instead.”

“Very well,” reply the men, who put a premium on the house for the purposes of negotiation because they knew perfectly well how much Sally wanted it, “but upon closer inspection, the house is clearly worth no more than $350,000. It’s got a leaky bathroom tap, and the neighbors next door don’t take care of their lawn.”

I can anticipate your reaction: “That’s ludicrous! An asset is an asset, and its value should be constant!” Exactly. But in the traditional system of divorce, such logic stands a slim chance of survival.

“Okay,” you say, “then a third-party appraisal can solve the problem, right?” Wrong. Appraisals are largely subjective and, as a result, wildly inconsistent. If one side disagrees with the results of an appraisal, they can commission another. And another. This can go around and around in a flurry of legal correspondence and lawyers’ fees, and still the value of the house may remain a mystery.

I know couples who (at the court’s insistence) spent thousands of dollars for third-party valuations of their assets, yet as soon as negotiations resumed, they were right back where they started: stuck in total disagreement over what their things were really worth.

The Fairway Process puts first things first. Before negotiations about asset division begin, Fairway Divorce Solutions practitioners work with clients to describe the total financial pie. One by one, we come to a consensus on the value of each asset and each liability—each piece of the pie. Assets minus liabilities equals net worth—an easily divisible number. Only then do we begin putting assets and liabilities into the “His” and “Hers” columns.