How the Current Economy Impacts Family Law Cases
Divorce is a very personal process. However, current economic conditions can have a surprisingly significant impact on your divorce settlement. From how your shared property is valued to your ability to afford day-to-day living expenses post-divorce, the recession we are currently experiencing will directly affect you and your divorce.
Below we look at some of the biggest impacts that rising inflation rates and the drop in the stock market will have on your divorce process. We also discuss what you should do if you plan to divorce this year.
The Value of Your Estate
You will have to go through property division as part of your divorce. This often requires selling off assets, so you and your former spouse can divide the property’s value between you. Additionally, property that isn’t going to be divided must be assessed to determine its value to be properly accounted for during property division.
Current economic conditions have a direct impact on the value of your estate. The drop in the economy has meant that many assets have decreased in value, especially investment portfolios and retirement accounts. This has been very frustrating for many Americans, but it can be especially problematic for couples going through a divorce.
Property that may be affected by the economic downturn:
- 401ks
- IRAs
- Brokerage accounts
- Education accounts
- Pensions
- Real estate holdings
- Family-owned businesses
When things like investment and retirement accounts get divided, they are typically done based on the current market rate. Unfortunately, with the recent economic downturn, your portfolio may be worth significantly less than a year ago. Consequently, many people do not want to take their money out of the market right now, hoping that it will come back up in time. However, if you are divorcing, you may not have a choice, and with current market conditions, you may lose money.
Similarly, though the real estate market has been booming, interest rates are starting to increase, making people more hesitant to buy. Consequently, where last year we saw residential homes being sold in days for well over asking, now homes are sitting on the market longer, there are fewer buyers, and prices are beginning to come down. If you and your soon-to-be-ex-spouse must sell your home or other property, you may find that it takes longer and that you won’t be able to get the price you hoped for.
Your Life Post-Divorce
Inflation rates are reaching heights that we haven’t seen in the U.S. since the 1980s. In June 2022, inflation reached a 40-year high of 9.1%. This has caused a dramatic increase in the cost of living, something many Americans are struggling with. Divorcing couples may be hit especially hard, and this difficulty can extend beyond the finalization of your divorce and into your post-divorce life.
While married, you and your spouse likely lived together in a shared household. In many ways, a shared household is less expensive than living as a single person. With the rising cost of living, your new post-divorce expenses may seem even more dramatic. And, if you are in a situation where you are ordered to pay spousal support or child support, you may find your current salary doesn’t stretch nearly as far as it once did.
With things like gas, food, and rent costing significantly more but salaries staying relatively static, you may also find the things you previously afforded are now out of reach. This may mean that you cannot take the vacation you had planned or that you struggle to pay for your child’s extracurricular activities. Inflation makes living life post-divorce difficult both practically and emotionally.
What Does This Mean for You?
Though the economy has taken a hit, this does not mean you should not get out of a bad marriage. Indeed, just because the economy is struggling and inflation feels out of control doesn’t mean you cannot have a successful divorce. Doing so may require a little more planning as well as an adjustment to how you manage your finances.
If you are considering divorce but aren’t sure if now is the right time, we recommend that you speak with an experienced attorney you feel confident in, as well as a financial advisor or accountant. The more information you have, the more likely you will achieve a positive outcome for your divorce.
Have questions about how the economy might affect your divorce case? Call the Law Office of Greg Quimby, P.C. We are here to help.