The $150k oversight

I recently worked on a divorce case that went to mediation. As a CPA, a CERTIFIED FINANCIAL PLANNER^® professional, and a Certified Divorce Financial Analyst^® professional, I had done my best to prepare the attorney and the woman for the big day.

I also recommended that I be there, during the mediation.

The attorney didn’t agree. And so his client—the woman—was inclined to say no, as well.

Spoiler alert: The name of this story should give you a tip-off as to where it went.

Here’s what happened.

During the mediation, the mediator made a suggestion. He said, “Let’s use the current values for just the retirement accounts. We’ll use the date-of-separation values for the bank account.”

And everyone in the room said, “Sure. Fine. Sounds reasonable.”

Note that I was not in that room.

Holy mackerel! I would’ve had smoke tooting out of my ears at a suggestion like that! Not to get into nerdy details—oh, what the heck, I will get into nerdy details—but that is the ultimate apples-to-oranges mistake, and it ended up costing the attorney’s client dearly.

Nerdy details: If the couple’s IRA went up more than their bank account did between the date of the separation and the date of the mediation, that means that you’d be trying to compare the current value of one account with the historical value of the other, and then trying to equalize that. It’s like division by zero. It’s impossible. It’s, pardon me, bone-headed.

Now, had I been in that room—as I had, you certainly recall, suggested—I could’ve nipped this in the bud. Sure, I could’ve called out that apples-to-oranges error. But I’m not there to make the mediator look bad; I’m there to help the attorney and his or her client.

So what I could’ve done, quite easily (and mind you, no one else in this room could’ve done this), was to explain why that proposed split wasn’t equitable. Moreover, I could’ve modeled the proper results, on the fly, in the room, with my little laptop.

But I wasn’t there. I learned about all of this after the fact. After all the ink had dried.

I still ran my little scenarios. And guess what? Everyone’s agreeing to the mediator’s ill-advised proposal cost that woman $150,000 that she should have pocketed.

Yeah. And I was the one who had to break the news to her.

Think she was happy? Think she was happy with her attorney for keeping me out of the room for what would’ve been a nominal expense?

This is a cautionary tale. It’s not enough to just get me to work up paperwork. Things change. In the room. On the fly.

Reach out to me and give me a call. Trust me, I want to be in your court. I don’t enjoy these cautionary tales any more than you do.