If you are negotiating with your spouse around, in particular, financial issues, you may come up against the challenge of whether or not to accept an offer or a settlement structure that gives you less financially or that has you responsible for more financially than the law would. When I reference the law, I mean then you could expect to receive or to have to pay if you went to court and you allowed a judge to resolve your case for you. If you find yourself in a situation where the terms of settlement that you’re considering are significantly less favorable to you than you understand the law would be, one of the challenges that you have to face is, “Do I accept this? Should I accept this?” Of course, there’s no automatic way to answer that for any one person. It’s really a very personal decision. What I want to try to do in this episode is outline a couple of the questions that you should be asking yourself and a couple of the common reasons I observe for people to accept a financial settlement that is less favorable to them than a court might be, which are completely valid reasons. Let me go through those with you now.
The key thing I’m trying to help you solve for is whether you will not only be okay with the settlement terms when you’re signing them in the present, but whether in a year or five years or 10 years from now, you will still feel okay with the settlement that you accepted for yourself. That’s a goal of any settlement process is not just that you’re okay with the settlement when you’re agreeing to it, when you’re signing the contract, but that middle and long term, you feel like, “Okay, this wasn’t my ideal, but I can accept the terms of our agreement, and I don’t regret what I accepted in the context of our negotiation.”
One of the primary reasons that I will see people take a settlement offer that is less favorable to them financially than they might have received if they had gone to court is simply by weighing the cost of going to court against the difference in what they are accepting as their settlement terms and what their ideal settlement terms might be. For instance, if you are accepting the settlement that is $50,000 less favorable to you than you think would be fair, or if you’re considering accepting such a settlement, you want to be very clear about what it would cost you, both financially and otherwise, in terms of not just attorney’s fees, but also in terms of your time and in terms of the emotional energy it takes to go to court for you to litigate the particular issue you’re considering settling, which is what you would have to do to get that more favorable result in court.
I will see people where they assess that the cost, financial, time-wise, emotional, and otherwise, of going to court to get that better resolution for themselves, where the cost of that exceeds the difference in value between what they are considering accepting and what they think they would get in court. Then it doesn’t often make sense for you to go to court because you will be, in effect, losing money or losing value by going to court.
Another related consideration that I see come up for people when they are debating whether or not to accept a settlement offer that’s financially less favorable to them than the law would provide is almost the opportunity cost of not accepting the offer and being done with the process. Essentially, let’s say you have a lot of interesting projects and things going on related to your work and related to your ability to generate income and to create assets on your own. Instead of being able to devote your time and energy to that, you’re devoting your time and energy to negotiating the financial settlement in your divorce. You may likely come to a point where you assess that by not accepting the settlement offer on the table, even though you feel that it’s X thousand dollars less valuable to you than you would get in court, by not accepting that offer, you are losing out on greater value that you could be creating if you could turn your attention from the divorce process, once it is resolved, to the projects and engagements that you have in front of you that will generate more value for you in the short, middle, and long term.
In short, it’s a bit like feeling that you have more valuable things to devote your time to and that you don’t want to be pennywise and pound foolish and focused on not losing out on $10,000 in this divorce negotiation when, in fact, you could be creating way more value than that in the short to mid-term if you could just devote your time and attention to your work projects or some entrepreneurial thing you’re involved in rather than devoting your time to negotiating the financial settlement in your divorce.
Somewhat related to that but slightly distinct would be maybe a broader view of your future financial prospects, and in particular, in comparison to your spouse’s future financial prospects. Where you assess that whether it’s due to your work or to a new relationship or to family wealth or for whatever reason, you assess that your future financial prospects unrelated to your marriage, unrelated to your divorce settlement, are much stronger than your spouse’s future financial prospects, you may be motivated by that alone or by that in combination with other factors to say, “You know what? Given our disparate financial positions in the future, I don’t feel like I need to capture all the value that’s on the table in our divorce negotiation. I have other things going for me financially, and I feel comfortable.” Or maybe it feels fair to you to be a little bit more generous in the settlement vis-à-vis your spouse than, for instance, a court might have ordered you to be.
Somewhat related to a sense of fairness but more looking historically than looking to the future, I also see people consider the history of their relationship. That could be the history of their and their spouse’s respective contributions, whether it be contributions to their partnership financially or contributions as a parent or their respective contributions to the breakdown of their relationship, though that can certainly be a sticky area which people don’t tend to see eye to eye on. Anyway, in consideration of the history of your relationship and of your different contributions to your relationship, you may end up feeling like, “You know what? Based on what I contributed and what my spouse contributed in these different areas of our partnership, it actually feels right to me that I would take slightly less in this area, in consideration of what our history has been.” I can’t say that I see that commonly, but I do see it sometimes. I want to say that that’s valid if you feel that clearly and over time. That wouldn’t be a decision that you want to make at the very outset of your process right when the divorce is still quite new, but if that’s something that you feel consistently right about over time, that’s not an invalid way to come to or an invalid factor to take into consideration in coming to your settlement, even if it means taking slightly less or significantly less than you would have received in court, if it resonates with you in the context of your relationship and your history with your spouse.
Finally, I would say maybe not specific to your history or to your future but more to your own value system and your sense of how you want to engage in a negotiation with your spouse, you may have values independent of your negotiation process, like valuing being generous, or it could be valuing being financially independent. Those aren’t specific to your relationship, but they’re just values that you hold, and they can influence how you think about what you would like to give or what you would be willing to accept in your divorce negotiation. You may end up, as a result of holding those values, in a different place than the law or a court would and that’s also completely valid. Again, similar to looking at the history of your relationship and your contributions to the marriage and making a settlement decision based on that, making a settlement decision based on some of the deeper values that you hold: generosity, independence, whatever it may be. That’s not something that you want to do quickly or at the outset of the process. Something that if you have an inclination in that direction, you might want to keep to yourself for a little while and see, does it change over time, or are your consistently feeling that, “No, this resonates with my value to be generous,” or, “This resonates with my value to be independent”? Whatever value is influencing you, make sure that that is resonating with you over time before making a settlement offer or accepting a settlement offer influenced by that particular value.
One other just related word of caution I would give is, and having seen people go through this process and having seen people one and more years post their divorce process, your feelings about and your understanding of your relationship with your ex and your contributions to the relationship and what your ex contributed will often change over time. So you want to be careful not just to not make decisions quickly about settlement, but also to not let your decision making about your ultimate financial settlement be too grounded in your subjective sense of fairness coming out of your relationship because that subjective sense is likely to change over time, and you don’t want to find yourself in a position where because your sense of, and understanding of, your relationship has changed, you no longer feel like what you agreed to in the negotiation was fair, was honoring of you and of the relationship.
Finally, one word of caution. Across the board, an area where I would discourage you from basing your willingness to accept a settlement on is a hope to please your ex-spouse or to be in your ex’s good graces. I say that because if you work toward a fair settlement, one that you can accept and your ex can accept, that should be enough to be in the good graces of your ex. If it’s not enough, going above and beyond in generosity probably won’t be enough either. The terms of your financial settlement are permanent and they are legally enforceable, whereas your ex-spouse being pleased with you or not is subject to change, and it’s definitely not legally enforceable, so you can make some big compromises financially in the interest of maintaining a good relationship with your spouse, in the interest of staying in their good graces, and maybe you are when you sign the contract, but a year hence, you’re in a new relationship and the relationship has fallen apart in a way that you were trying to solve for by giving up on financial terms in the document.
You want to be really careful in that area to make sure that any concessions that you’re making financially are not driven by a motivation to please or to placate your ex and instead are driven by any of the considerations or a mix of the considerations that I mentioned before: the cost of going to court, the opportunity cost of not moving on with your life and with other projects that you have, the differing financial prospects that each of you has, the differing financial situations that you and your ex are likely to find yourselves in in the future, your sense of your respective contributions to the relationship, or potentially just other values that you hold around generosity, financial independence. It’s not an exhaustive list, but those are common ones. All of those can be valid factors that influence your decision to take less than what the law might provide for you or to provide your spouse with more than what the law might require of you. They are absolutely valid considerations. You just want to make sure that you are clear about which of those considerations is influencing your decision. You want to really ask yourself and reality test whether or not making a decision to take a less favorable financial settlement is something that not just today, but a year from now, five years from now, and 10 years from now, you will still feel good about.
Those are a couple of considerations to keep in mind when you are weighing whether or not to accept a settlement that’s less favorable to you financially than what the law would provide for. I hope it was helpful for you.