COVID-19, Recession, and Divorce: Five Tips for Making Smart Decisions
The world is dealing with the COVID-19 pandemic and heading into a recession. For a couple in the midst of divorce, the discussion around dividing marital assets and liabilities is now more complicated. Adding to this complication is that one or both spouses may be facing a job loss. If you are currently in a divorce lawsuit, you may be wondering how to handle the changing financial landscape.
First, do not panic. Making important decisions while anxious and fearful does not lead to the best outcomes. Even though you will have to make difficult choices, you have choices. Take a deep breath and consider the following:
1. Identify interests, goals and concerns.
Your concerns may be easy to identify when the value of your assets is declining as you discuss dividing them. And most people understand goal setting. Interests though may be confusing. Interests are the engine, the motivation, the impetus that drives a position in a divorce case. Whereas positions are black and white (“we own one car and I want it so you cannot have it”), interests are multi-colored (“I want safe, reliable transportation and we need to figure out all the ways this interest can be accomplished”). Think of it like looking at a globe and picking a destination. The place you chose is like your interest and there are multiple routes and modes of transportation that will allow you to reach your destination.
If this recession is colliding with your divorce, think about your destination. Take stock of your goals, concerns and interests. What might have been important to you when the divorce started might seem less important to you now.
2. Gather information.
At the very least, the lower values of investment and retirement accounts will have to be considered along with the tax consequences of liquidating, or not, specific assets. Assets such as the marital residence or a business interest may need updated valuations. Both spouses may need to reassess existing and post-divorce budgets. The bottom line is this recession just created a new reality for divorcing couples. Updated financial information is a must.
3. Generate options.
After reassessing interests, goals and concerns and gathering updated financial information, generate all possible options for meeting your goals, interests and concerns. In the great recession of 2008, we saw couples considering options such as (1) reconciling; (2) staying married but with conditions (marital property agreements dividing financial lives; allowing an unemployed spouse to remain on the employed spouse’s health insurance); (3) pausing the divorce (so a spouse could find employment; or to get past the recession); (4) moving forward with divorce but looking for ways to minimize divorce costs; (5) pooling financial resources post-divorce; (6) jointly owning certain assets post-divorce until the assets regained value; and (7) completing the divorce but adjusting expectations in light of the different financial landscape.
4. Evaluate options.
After generating options, think through all of the options—the pros, cons, unintended consequences, and how much closer to your destination each option moves you. If an option does not move you closer, then let it go. Consider a combination of options. For example, one might pause the divorce, enter into a marital property agreement, jointly own a business, and agree to finalize the divorce until a spouse is reemployed. The idea is for you to think through what is important to you; get new/updated financial facts; identify all the possible routes; and then evaluate the routes.
5. Make decisions.
After all of the above, it is time to make decisions–to select the best route to achieving your goals, interests and concerns. Your divorce lawyer will help you along this path by sharing her experience, knowledge, and expertise to help you figure out the best way forward. A recession definitely changes the divorce landscape but at the end of the day, it is just a different landscape. Working through these steps, even if imperfectly, will reduce your fear and anxiety and will allow you to make informed decisions about your future.
This post was written by Kristen A. Algert.
“I help clients look to the future, not the past, approach issues with a solution-oriented mind, and be proactive in order to move forward with confidence.” — Kristen A. Algert