divorce insurance

Divorce financing by private companies?

It seems there is a new trend in divorce (there are always new “trends”, but this one does seem new), the private financing of a divorce by a for profit company. In other words, when someone needs a divorce but cannot afford a lawyer, instead of borrowing from relatives, or if there is no way to borrow, there may now be a new option. It seems that if the stakes are high enough, or if there are enough assets to ensure a return on investment, people going through a divorce may now be able to borrow money with the settlement monies used as a sort of collateral. There is a story in the New York Times about this (click here for the story).

Is this a good thing? That’s a very good question. The obvious discussion might be “why don’t divorce lawyers simply do this?” The not so obvious answer (until you hear it) is that it would be highly unethical. Why? Because divorce lawyers should not be motivated to simply obtain as much as they can for their client, unless that is what the client wants. So, what if a lawyer’s fee is dependent upon a large recovery, and then their client decides they want to walk away with no money? Then there is a potential conflict because the lawyer will not be paid if the client walks away, yet the lawyer’s duty is to be governed by the client’s wishes. So perhaps this new idea, a loan or investment by a third party could help? I have not yet thought about it long enough to know if I support the concept or not. What do you think? Please post a comment.

Divorce Insurance? Why not a prenup?

I was recently asked to comment for CNN (click here to see the video clip of my appearance on “Newsroom” with Don Lemon) about a new fad: Divorce Insurance. My first reaction, as I told Anchor Don Lemon, is that the best insurance against divorce is not getting married. Of course that was said “tongue in cheek”, but really, if you plan to get married and want to pay, monthly, for divorce insurance, it seems very strange if not counterproductive to the goal of a long-lasting marriage. Let’s explain it this way. If a couple, or even just one spouse is considering a divorce, AND they know the expenses of a divorce are already paid for by insurance, isn’t that just one more thing that facilitates them moving forward with divorce? It is almost like saying “hey, we paid the insurance, let’s collect on it”.

Prenuptial and postnuptial agreements can predetermine division of assets and alimony. Once those things are decided, only issues related to children remain. And how can you predict the cost of issues relating to children. There are so many variations on parenting time, decision making, travel expenses, etc. How can we insure against all such costs?

Yes, divorce insurance sounds like a nice, safe bet. Why not limit your exposure? But when you start to think about the concept, it unravels. For instance, if I want to be sure I have the best divorce lawyer, is there any guarantee that the best lawyer will accept my insurance company (since insurance companies typically pay reduced rates to lawyers)? And what about a wealthy spouse who can afford a good lawyer and then, when the other spouse says “well, I need a good lawyer too”, the court’s reply may be “You have insurance so use that”?

I am all about prevention, but smart, effective prevention. To me, that is a prenuptial agreement. A prenuptial, or post nuptial agreement forces a party to think about all of the possibilities specifically. It is unclear to me how divorce insurance can address evrything, but if it makes someone more comfortable getting married, then perhaps it is not that bad. But for the best protection, I would suggest a consultation regarding a prenuptial agreement (which of course must be prepared and reviewed by an attorney in the proper jurisdiction, and I am certainly offering advice since prebuptial agreement laws vary from state to state). And besides, isn’t it nice flying without a safety net sometimes? Yes, I am a divorce lawyer saying that. Perhaps the thrill of a good marriage is that each spouse is voluntarily continuing to commit without fear of consequence. But if that thrill has been spoiled once by a bad divorce, then perhaps a prenup is right for round two.