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E9: How to keep divorce costs down

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On the Show Today You’ll Learn

Bryant McKinnon family law solicitor Gemma Rope stepped in as host for this podcast, with Benjamin away on a well-deserved holiday.  Gemma spoke with Heather McKinnon about how to control the cost of divorce and separation.  Heather mined her forty years of family law experience to come up with some valuable tips on how to avoid unnecessary legal costs and minimise the financial (and emotional) cost of divorce and separation.

Topics covered include:

  • DIY Divorce
  • How legal fees are determined and how to avoid unexpected fees
  • How to minimise conflict over property settlement
  • How to minimise conflict over children’s matters
  • The value of mediation and arbitration

Links & Resources Mentioned in This Episode

No specific resources were mentioned in this show, however it is worth referring to these past podcasts for more information on managing property settlement and child custody issues in order to keep legal costs to a minimum:

Getting a Fair Property Settlement

Child Focused Parenting Arrangements After Divorce

These FAQ documents may also prove useful:

FAQs Property Settlement

FAQs Children’s Matters

FAQs Mediation

 

 

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Full Episode Transcript

Gemma: Hi everyone and welcome to episode nine of The Family Matters Show podcast. I’m Gemma Rope from Bryant McKinnon Lawyers, and today I’ll be standing in for your usual host, Benjamin Bryant, who is on holiday. But we do have our other regular here with us today. Welcome back Heather McKinnon.

Heather: Thanks Gemma. It’s great to be back. With all that’s happened in Australia over Christmas with the fires right around Australia, we hope all our listeners are safe today.

Gemma: Yes. The tragedy that’s been unfolding around the country perhaps puts some of our day-to-day family problems into perspective.  Which is a good way to introduce today’s topic, which is: how to keep the cost of divorce to a minimum. And there’s no doubt that perspective can play a big part in that. Today, we’re going to get Heather’s perspective on reducing the cost of divorce. With over 40-years experience in family law, Heather has seen it all. Everything from the amicable do-it-yourself divorce, to the nasty, he-said-she-said divorces that cost a fortune and benefit no one except the lawyers.

Heather: And can I just say, Gemma, even the lawyers don’t really benefit from nasty divorces that go off, the fees are high, but as a practitioner, the nastiness and futility takes a toll on everyone including, as you know, us. So, no one really wins when a case turns into a nightmare.

Gemma: Especially in a court process that just delays everything and causes problems for other matters.

Heather: Yeah, that’s right.

Gemma: So if you can focus on keeping the cost of divorce down, you might also keep the nastiness down and make it easier to get on with your life. So double saving.

Gemma: Let’s get started with our questions. The first and most obvious question Heather is:. What is your opinion on a do-it-yourself divorce? Can people actually manage the whole process themselves? And if so, where should they start?

Heather: As you know Gem, I’m a great advocate for self-empowerment. So, when people see us initially, they expend a couple of hundred dollars for an overview of where they’re up to.  And certainly, it’s the role of you and me and Ben to get people to do as much as they can themselves if possible. So, for example, divorces, which are the thing that end the marriage, we would only do a handful each year. We get everybody to do their own. That’s a really simple way for people to cut an expense out of the process.

Heather: But when you’re looking at things like property settlement, many people are able to negotiate and document and do their own deal. They might need a little bit of help from lawyers, but in the main they’re able to go online, look at the documents and the material available from the court itself. If you’re trying to do your own stuff, it’s really good. So, I would say that our job is to filter out initially whether people are able to do a lot of the process themselves. We are only left with 1% of couples they separate in Australia going to any sort of contested litigation. So, 99% of people do a lot of the hard work themselves.

Gemma: So, it’s a matter of how complex are the assets involved and how capable is the actual couple to be able to interpret what they are finding on the Internet.

Heather: Yeah, if we give a case study, often we’ll see a young couple who might be just 30. No children. They have been together for ten years. They’ve bought a house. They’ve got their super. They’ve both got some tertiary education, teachers, police, nursing sisters, things like that. They’re very able to write up their own material and lodge it, because they’re doing a 50/50 split and there’s nothing unusual in the case.

Heather: Then the other side of that are, multimillion-dollar cases with very complex valuations and often you might have one party who’s concentrated on being at home, has no idea of how the finances are run. In those cases, it’s almost impossible for the one that hasn’t been involved to act for themselves and they will need help.

Gemma: Thank you. Often, we see couples start out thinking they can separate amicably and then something happens and disputes escalate. What advice do you have to prevent that from happening?

Heather: So, we know from the studies of relationship breakdown that there are two prime times when conflicts are going to go sky high. One’s at separation itself. And the other is when one partner clearly re-partners and that might be five or even 10 years down the track. So, what I tell people to do is at those two junctures, go and get good psychological help so that you’re focusing on your emotional recovery with people that are trained to help you with that. What happens in the legal arena is people are often spending money dealing with emotional issues rather than legal issues. So, the big message is: don’t mix the two up. Get help to look at: is this actually a legal issue or is it an emotional reaction to what’s happening to me?

Heather: And don’t forget that advice that if you’ve been separated for some years and your partner flags that they’re remarrying or re-partnering, it can trigger some of that initial reaction. And you may get drawn back into conflict. Get to a counsellor. Don’t come to lawyers and get tied into paying a fortune to deal with something that we really aren’t able to help you with.

Gemma: What about something like venting on social media about something that’s upsetting you about an ex-partner’s behaviour. Do you have advice for people about locking down social media

Heather: I mean, obviously, you see in your frontline work that that’s exactly the sort of thing that adds to cost, so you’ll get people coming in with literally a box full of printed out text messages, social media posts. They want you to do affidavits that run to hundreds of pages and really that stuff is of little relevance in a judge determining either property settlement or who gets the kids. So, the best way to defray legal costs is: don’t get involved in that sort of war in the outside world with trying to get allies on your side of the battle. That’s a real disastrous route to go down. And it will mean that your legal fees will escalate.

Gemma: If you do decide to use a lawyer, are there things you can do to make the lawyer’s life easier, that might actually reduce your fees?

Heather: Obviously the more organised you are as a client and the more the hard hack work you can do, then the less you have to expend with lawyers. So, if we’re looking at something like a property settlement, what we need as lawyers are: updated statements from your super fund, updated statements from the bank showing what your debt levels are, appraisals from real estate agents. Now, people who are organised and can function to get that to us in an organised way have much less complexity involved. The other side of that is if they’re completely unable to do even basic tasks, then that involves us doing all that work for them, which leads to additional expense. So, don’t start any of this until you in the calmest space possible, and then look carefully at what your lawyer’s asking you to give them and stick to those lists. Don’t try and second guess or bombard your lawyer with e-mails in the middle of the night with thousands of documents that you think are relevant. It’s really setting up a good level of communication where you work as a team and listen carefully to what you’re asked for.

Gemma: On the subject of fees, can you explain how legal fees are determined and what clients can do to prevent being hit with unexpected fees?

Heather: So, we have legislative requirements for legal fees right around Australia. But there are two main methods of costing in the family law arena. So, when I came into practice in the early 80s, the only way that law firms quantified how much they were going to charge, was through a thing called time recording. Six-minute units. And so, there’s lots of American shows about that.

Heather: So that method means that if you’re in one of those cases that’s gone off the Richter scale because people aren’t focused on keeping issues really contained, you can find yourself, even in a very simple case, incurring thousands of dollars because the lawyers are having to respond to all of this chaos.

Heather: Some firms have now moved to a much more realistic way of costing, which is a quote that is fixed. So, you negotiate with your lawyer to do a job. So, for example, it might be, I want you to help me negotiate a property settlement with my ex-partner. We then send out a fixed quote to do that job. The lawyer and the client know exactly what the pricing situation is, and there’s no nasty surprises.

Heather:  We were one of the early up-takers of that method of pricing, probably nearly a decade ago. There are many more law firms that are now moving to that fixed price. I’m an absolute passionate believer that that is the best way to contain your costs. Make sure that you get fixed price quotes. Time recording works well if you have efficient senior people who know the job and who know how to contain chaos. But it’s a very difficult method to use if you don’t have senior practitioners who can cut to the chase and stop all of that chaos happening.

Gemma: And for a client the added stress of knowing if they call and have a conversation with their solicitor on the phone, how many minutes is it going to be and how many dollars are they’re being charged, and the stress of that…

Heather:  You know Gemma you’ve got a young parent on the phone and, their kids have been removed from their care and the last thing you want is a price barrier, where at a critical time, I feel like can’t renew because you’re going to be sitting there with some sort of monitor. What I find and I’m sure you do in practice as well, is that people are very respectful of our skills as long as we’re providing them with timely responses, their ability to feel more satisfied that they’re not going to have those cost blowouts definitely helps them manage the whole process of the dispute.

Gemma: One of the things that tends to cause conflict and escalate legal fees, is working out a financial separation. Everyone says they want a fair settlement, but often people disagree on the definition of fair. Heather, what’s your advice on how to minimise conflict in a financial settlement and thereby minimise the legal costs?

Almost every case, in my experience, that goes off the rails are because people don’t follow a well-trodden path that’s been laid down through the last 40 years. That is: What assets are we disputing? What’s in the pool for division? So, what houses do we own, what super have we got, what cars have we got, what contents have we got, what stock have we got, what business have we got? Second step: How much do each of those assets value up at?

Heather: What tends to happen is people jump to the end of the equation, which is how much am I going to get? Am I going to get 60%, or they’ll come to you Gemma and say, “I want 70%”. But they don’t even know what they’re dividing up. And as you know, they’ll come in and say, “We’ve got a million dollars worth of assets”, but they’ve never looked at the debt level.

Heather: So the biggest message I can give everybody is don’t start looking at who gets what until you actually know what you’re dividing up. What your net worth is. Because people tend to have two personalities, either optimistic, where they will over exaggerate the value of assets and undervalue the value of debt or the opposite, they’ll be very pessimistic about the value of assets. And so, it’s really important that if you want to contain costs, you and your partner focus on getting those first two things right. What have we got and what’s it worth? Once you’ve got that answer, then you can start the argy bargy of how you divide it up.

Gemma: And not dragging that process on too long. As soon as you can tell that there’s going to be an argument about what is in the pool on what the value is, employing people to help with that.

Heather: Yeah, people will spend inordinate amounts of legal fees on disputes over the contents of a house. And the typical dispute will be because they pull the NRMA contents insurance and it says all the contents are insured for a hundred thousand. The shock for people comes when we send out a valuer and the second-hand value of the contents might be six or seven thousand. So you’re exactly right, Gemma, the real area for these cases to go off are when people get into this fight about what things are worth without any informed knowledge of actually what they’re worth.

Gemma:  And now the other area that’s a major source of conflict is child custody. Again Heather, do you have any advice on how to minimise conflict over child custody?

Heather:  We’ve come a long way, Gem, with the advent of that mediation process and the funding of the Family Relationship Centres. I read an article over Christmas from a prominent federal politician who was in parliament before we had Family Relationship Centres and mediation. Forty percent of their constituent interviews were people who were arguing over their children. He says now that’s less than 5%. So that’s a really good indication of how mediation has really helped to remove conflict away from lawyers and put it with social scientists. Now, when we talk about Family Relationship Centres, they are the centres that the Attorney General funds in most cities and regional communities, but there are many other forms of mediation. So, the legal aid commissions in each state-run programs, private psychologists and family therapists. So, the big message is, do try all of that before you come anywhere near lawyers in relation to children, unless the case is clearly so chaotic that there needs to be intervention from a judge straight away. And that will be in those extreme cases where a parent is acting to harm kids either through mental illness, drug abuse, power and violence, those sorts of issues.

Heather: But in the main, most Australian parents, with the help of mediators, are able to move on quite quickly after they separate with appropriate arrangements for the kids.

Gemma: And reducing conflict about children, isn’t only going to hopefully reduce any costs associated but also just the impact on the children.

Heather: Yeah, absolutely, and that’s what the message is always in these podcasts is: don’t bring kids anywhere near any sort of conflict, because the overwhelming evidence is that’s what will stuff them, not the separation, the conflict, if you can’t keep it under control.

Gemma: So when conflict does arise, you just said mediation, obviously very helpful, arbitration and you say that can help to prevent legal costs from blowing out.

Heather:  The processes to resolve disputes have different costs around them. And mediation is much cheaper than, say, a hearing in the family court involving barristers, solicitors, now the Commonwealth government charges litigants significant daily fees just to have the privilege of being in court. And so that is a very cost heavy way of resolving conflict. And it’s a last resort way of resolving conflict. Anything that you can do outside of litigation is cheaper and much less stressful. So, you try that first and you really have to rely on your lawyer to tell you whether they feel you’ve exhausted those solutions. So, your lawyer will be able to say to you, now it is time to litigate. And as you know, Gem, you and me and Ben see about 600 people a year, but we would only run ten matters to a final hearing. You don’t want to go there if you can avoid it.

Gemma: Thanks, Heather, for those really valuable thoughts on how to keep the cost of separation and divorce down. I’m sure our listeners are going to get a lot of value out of that and hopefully save money in the process.

Gemma: Next month, Ben will be back in the chair and we have a very special guest. Rhys O’Brien is a barrister who regularly practices in family law and has appeared in a number of matters for Bryant McKinnon’s clients. We’ve asked Rhys to come on the show to talk about social media. As in so many other aspects of our life, social media is changing family law and presenting a lot of hurdles for people trying to negotiate a separation. Rhys will have plenty of stories to tell. So, we really look forward to having you on the show.

If you’ve had an experience with social media and divorce, we’d like to hear about it. Please either send us a message on Facebook or email us on familymatters@bryantmckinnon.com.au.

Goodbye for now and we hope you’ll be listening again next month.

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