Choosing an Easier Path in Divorce

By:  Gus Dimopoulos

Divorce proceedings, and especially high-net-worth divorces, involve countless questions: Which assets are the couple going to split, and how do they split them? What does child custody look like? And so on. But every case starts with perhaps the most important question of all: Will the couple settle the matter through mediation or litigation?

The answer they give you influences everything that follows, from who is involved in the legal proceedings and how long these last to how the assets are ultimately divided. When I have an initial consultation with a divorcing client, this choice is the primary topic of discussion. And in nearly all cases, I recommend that clients pursue mediation, not litigation, for three reasons: One is the cost involved. The second is the emotional downside of litigating. And the third has to do with the feeling of control the clients are going to want to have over their own destiny. These three things should be kept in mind not only by the couple but by the financial professionals who serve them, such as wealth advisors and accountants.

Let’s break these three ideas down further:

Control. When high-net-worth clients ask me whether they should engage in mediation or litigation, I rephrase the question another way to help them see it more clearly: “Do you want to control your own destiny when it comes to dividing assets in the divorce? Or would you rather that someone else control your destiny?”

I ask because when they choose litigation, your clients are outsourcing the decisions about their assets and their life to a judge. They’re also opening themselves and their financial professionals to subpoenas, sworn testimony and other mechanisms that will have them feeling as if they’ve lost power and agency in a crucial personal matter.

When framed this way, it’s clear that mediation is almost always the more prudent path forward. They might not want to deal with the emotions stirred up when they have to sit down with their ex-partner. But mediation ultimately allows both spouses to make common-sense trades and prioritize their preferences when splitting assets.

Cost. The cost difference between divorce mediation and litigation is often staggering. A good mediator could likely get the job done for less than $20,000, a sum that wouldn’t cover even a single divorce attorney’s retainer when wealthy clients pursue litigation. Wealthy individuals and their financial teams may believe that smart litigation will allow them to walk away with a larger chunk of their assets, but they need to factor in the steep legal costs associated with that.

Emotion. Rare is the divorce without any negative emotions. But if a couple chooses litigation over mediation, I can guarantee there will be significantly more negative emotions. Mediation allows the separating couple to work collaboratively before ultimately parting ways—if not amicably, then at least on mutual terms. Litigation, on the other hand—especially when children and custody are involved—often breeds unnecessary conflict and comes with additional pain. This negativity can extend to the financial professionals involved with both parties. Litigation frequently leaves one side angry with the outcome, and wealthy clients may transfer that ire onto their wealth advisors or accountants. Why? Because financial professionals can be subpoenaed or called to testify in litigation, affecting the results. When this happens, advisors can lose not one but multiple clients, as they frequently represent the friends and family of the divorcing—and now angry—client.

I have a particularly memorable anecdote about an advisor caught up in a client’s divorce litigation. I was handling a divorce case for a wealthy client when the wife emailed the couple’s financial planner requesting a document. Rather than share it, the planner forwarded the email to the husband and asked, “Should I ignore this request?” The problem was, he accidentally forwarded his note to the wife’s father, who had an email address similar to her husband’s. The financial planner was hauled to court to explain the details. Needless to say, he lost a few clients.

When it comes to mediation versus litigation, it’s almost always better for all parties—the couple and their financial professionals—to pursue the former. Mediation means lower costs, more control, and more positive emotions, a trio that’s hard to argue with.

Gus Dimopoulos, Esq. is managing partner of Dimopoulos Bruggemann P.C., a matrimonial and family law firm based in Westchester County, N.Y. and New York City that specializes in high-net-worth divorces. For more information, visit www.dimolaw.com. 

This article was originally published in Financial Advisor and can be viewed here.