What does a 'good' divorce look like - when are you dealing with the finances?

With January being a time when many individuals make decisions about the future, including to separate or divorce, and with this being ‘Family Mediation Week’, we explain the benefits of family mediation and how professional advisors can be involved.

What is family mediation?

Family mediation is a non-court-based process for resolving disputes, whether purely financial, children related or a combination of the two. It is a voluntary and confidential process that sees a neutral and professionally trained mediator help a separating couple explore and, hopefully, negotiate a way forward on future arrangements. Any agreement reached in mediation is not legally binding until the parties have had the opportunity to take independent legal advice on it. Once this has taken place, the parties’ lawyers (if solicitors are instructed) will turn the proposed agreement into an order which can be lodged at court for approval by a judge.

At Kingsley Napley we have four trained family mediators and when we mediate we wear very different hats to when we are acting as lawyers advising our individual clients. A mediator facilitates discussion and helps couples find solutions that work for them and their children. As mediators, we are there to help the couple explore their suggestions for settlement, and to signpost where advice from other professionals would help to aide discussions.  For example, this could include identifying where tax advice may need to be obtained, where a pension expert needs to be consulted to assess value and/or income of pension funds or where there needs to be financial planning so that the couple can really see what their financial futures will hold. And, where children are involved, we frequently refer clients to child therapists or parenting coaches.

Discussions which take place with the mediator (save for the disclosure of financial information) cannot be referred to by clients and their lawyers in any court proceedings.  This means that clients can accept or concede points without fear of being held to it later if an overall resolution has not been possible.

Save for some exceptions (such as cases involving domestic abuse, child protection or urgent financial preservation issues), divorcing couples are usually expected to have considered mediation before starting court proceedings.

What kind of cases suit mediation?

Mediation can be used to deal with financial and/or children issues arising from a separation. It can also be used before a marriage or cohabitation to agree the terms of a prenuptial or cohabitation agreement. We mediated one ultra HNW couple who were intending to have a child together so that all the possible future financial and parenting arrangements had been considered. Arrangements for children can sometimes inform aspects of financial discussions.  For example, the couple may wish to ensure there are funds set aside for school fees if private schooling is agreed.  An “all issues” mediation typically covers both finances and children.

Clients can save significant costs and stress by engaging in mediation, and it can also be suited to complex or high value financial cases. We have mediated cases where the assets have ranged from £1 million to over £200 million. Regardless of the size of assets involved, it often makes sense to bring a couple’s professional advisors into the mediation meetings, whether company accountants, wealth managers, IFAs or their solicitors, with the intention that everyone has access to the same information and so that the couple can make sound, informed decisions during the process.

A common misconception is that mediation only works for couples who are on the best of terms.  However, mediation can still be used effectively in cases where couples have found it difficult to discuss and resolve matters to date. Yet some cases are not suitable for mediation and we always see clients for a one-to-one confidential discussion (called a Mediation Information and Assessment Meeting (MIAM)) at the outset to consider whether mediation is appropriate. Sometimes there may be other non-court options that clients can choose instead such as collaborative law, arbitration or a private FDR (financial dispute resolution) hearing.

Is family mediation the same for every case?

One of the main benefits of mediation is that the process is flexible and can be tailored to meet the needs of the individuals and family involved.  The traditional family mediation model sees the mediator meet with both clients together (remotely or in person).  However, mediators can also conduct “shuttle mediation”, where the clients sit in different rooms with the mediator moving between them. Co-mediation, where two mediators conduct sessions together, can be suitable for some cases, particularly where clients would benefit from mediators with different professional expertise (for example, a mediator who is also a lawyer and a mediator who is a financial advisor). Relatively new is “hybrid mediation” which involves elements of civil mediation and the mediator speaking to each client and their solicitors separately to help explore issues and settlement proposals. In this process, the hybrid mediator is able to hold confidential information (for example, about negotiating positions) in order to help identify common ground.

Is there a role for financial advisors, wealth planners or other advisors in mediation?

We frequently conduct mediations with clients’ advisors taking an active part. Where clients have the same financial advisor and both parties continue to have a good working relationship with them, it can be hugely beneficial to have that advisor attend mediation meetings.  This can allow the clients to explore the reality of the various settlement options being discussed. For example, in a recent case where we co-mediated and where the couple had a longstanding relationship with their wealth manager, we involved him in the meetings and also met with him separately to discuss his income projections. His input was crucial around the discussions about the capitalised sum to meet income needs for life and in relation to the children’s future educational costs.  The wealth manager was able to provide various calculations to demonstrate what fund was needed to provide different income levels, based on a range of agreed assumptions, and he adjusted these in real time during the discussions as required.

Where both clients and their advisors wish to continue their professional relationship post separation (albeit as individuals rather than as a couple), mediation can certainly help facilitate this compared to when there are contested proceedings which often affects the trust between the advisor(s) and one of the parties, particularly when the advisor has communicated more with one of the couple during the relationship.

Where a couple does not have an advisor in place, a mediator may recommend and introduce advisers if this is beneficial to the process.  

Other than flexibility, what are the other benefits of mediation?

A key benefit of mediation (as with other non-court options) is, of course, privacy.  Mediation is completely confidential, with both parties, the mediator and any advisors who participate signing up to a Mediation Agreement, which sets out clearly the confidential nature of the meetings. This can help protect any children involved and to keep financial details under wraps. Given the increasing push towards “transparency” in the courts and with it becoming more difficult for clients to resist applications by the press for permission to report on the proceedings, for couples in the public eye especially mediation is attractive to retain control and avoid the risk of potential media glare. However, clients do not need to have celebrity status to pique the interest of the press; stories of separation and divorce sell, irrespective of whether the parties involved are famous or “ordinary” citizens. A private mediated agreement ensures the parties involved can be confident the details discussed and agreed will remain private.

An additional obvious benefit of mediation is that it avoids couples being at the mercy of a slow, adversarial and judge led court process. The delays affecting the Family Justice system are well known and show no signs of abating, to the point where couples are now being urged by the President of the Family Courts to consider alternatives to court unless absolutely necessary. Mediation is significantly cheaper than court proceedings. When successful, mediation also usually provides a quicker resolution. Furthermore, the outcome is one that both clients feel they’ve signed up to (rather than having a decision imposed upon them) and can therefore come to terms with more easily.

With guidance, clients set the agenda for mediation, and choose what they want to cover in their sessions.  The agenda and the solutions explored in mediation can be tailor made to the family.  Court is a blunt instrument, and often the outcome imposed (particularly on financial matters) may not meet with clients’ interests, leaving both feeling dissatisfied.

Where there are children involved, mediation is child focused, and some mediators are trained to meet with children if this is considered appropriate (particularly for older children) and something to which both parents agree.

Mediation is not a form of counselling (although counsellors or therapists can join sessions, if both clients think this will help and agree to this).  However, a carefully managed mediation gives couples the chance to express their feelings, can be a powerful way of helping the parties feel heard and can help ease communications.  We have often had parties say that mediation has enhanced their continuing relationship with each other, which is useful in co-parenting situations in particular, and it helps preserve relationships with longstanding trusted advisors in some circumstances too.

So, while mediation is certainly not right for all clients, it is important that professional advisors are aware of mediation as an option for separating clients and the role they can play in helping to make the process successful. 

This article was first published in FT Adviser on 17 January 2023.

FURTHER INFORMATION

If you have any questions about the issues raised in this blog, please contact Charlotte Bradley, Stacey Nevin or a member of our family and divorce team.

ABOUT THE AUTHOR

Charlotte Bradley is head of the family and divorce team at Kingsley Napley, where she has been a partner since 2001. Charlotte specialises in all aspects of family law, particularly international issues, both in relation to finance and children. She has a reputation for cross-border jurisdiction issues, particularly European and Relocation cases, and for acting for unmarried parents in Schedule 1 (financial provision) cases.

Stacey Nevin is a Senior Associate in the family team.  She advises UK and international clients on matters involving all aspects of family law, in particular complex financial issues and private children cases.  Stacey is also a mediator and works with couples to help them resolve practical and legal issues arising from their separation without the need to attend court.