The dog days of summer are boom times for divorce. Here’s why it’s harder in this economy | CNN Business

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The dog days of summer are boom times for divorce filings.

Divorce filings tend to peak every March and August, according to lawyers and research studies. So right now many people are struggling with the emotional stresses and financial challenges of divorce.

If you think budgeting and saving is hard in this economy, imagine breaking into it.

The economy of 2023 has been marked by financial volatility, as fluctuations in the stock market, cooling home prices and the erosion of purchasing power have left many couples more insecure than usual. on how to divide assets.

Today’s climate calls for strategy, flexibility and compassion, according to realtors, accountants and divorce lawyers. You can’t inflation-proof a divorce, they noted, but there are steps you can take to mitigate the impact of the economy on it.

sell a house

For many Americans, their entire fortune is tied to where they live. But the value of the family home has been falling, at least in some regions. What if you have to sell anyway? Build provisions into your separation agreement that state when and by how much the price of the home will be reduced if it doesn’t sell, Jaime Davis, a veteran divorce lawyer in Raleigh, North Carolina, told CNN. The last thing he wants is for the market to go soft and he must contact his ex before he can react.

It must be in writing that the spouses will cooperate with visits and keep the house in good condition. The experts stressed that a quick sale is preferable as divorce proceedings tend to become more contentious the longer they drag on.

refinance your mortgage

Rarely has it been so economical to buy your spouse to maintain the family home. But a spouse keeping a home often has to get their partner’s name off the mortgage.

According to the Experian credit rating agency, removing a co-signer from a mortgage “almost always requires paying off the loan in full or refinancing by obtaining a new loan in your name.” Some home loans are assumable without refinancing, like Veterans Affairs loans, but most are not.

If you refinance, you will also need to qualify for a new loan based on income. Rising interest rates have made it very expensive, according to Scott Trout, divorce lawyer and CEO of Cordell & Cordell. A couple who paid 2.5% in 2019 are now considering refinancing between 6.5% and 7%, he said.

The fastest way to lower your mortgage interest rate is to increase your credit score before you apply. Pay off or pay off your credit cards on time as banks report promptly to credit bureaus.

Appreciating what’s inside

Here’s a cautionary tale from the super-rich: Oil tycoon Sid Bass divorced his wife Anne in 1988 after 23 years of marriage. Anne Bass received a sum of money, the house and its contents. That content includes paintings by Edgar Degas and Mark Rothko. Last year, an auction of the art totaled $363 million.

There probably isn’t a Degas in your penthouse. But other collectibles may have value. “People don’t know what they have, they have no idea”, said Victor Weiner, former head of the Association of Appraisers of America. “Check the walls, check the attic, check everything.”

Valuation of Stocks, Bonds and Retirement Assets

There is a great deal of emotion involved in dividing property that was acquired during the marriage. The up and down economy has not helped. Your stocks and bonds may have been worth a lot more just a couple of years ago. And on the other hand, it can be heartbreaking to discover that appreciation of assets you owned long before your marriage or your retirement fund could be treated as community property.

But “it’s much better to get divorced when most assets are at their lowest; sell now and hold (what you can) when it goes up,” Trout said. “One trap clients fall into is valuing a $100,000 401k at $100,000” by splitting the funds, and not taking into account future appreciation or tax benefits,” he said.

Experts say that trying to Choosing the best time to sell, or waiting for an asset split until after a recession, will result in a long wait and a lot of uncertainty.

Revenue Prediction in the Gig Economy

Courts often look back two, or sometimes three, years of income to determine spousal or child support payments. But the pandemic shutdown derailed that math.

So has the rise in irregular income through the work of independent contractors and so-called “side jobs.” Many of these jobs do not have traditional benefits like health insurance, paid days off, and little job security or compensation.

Therefore, it is important to test various financial scenarios. Make plans based on a likely income range, allowing for seasonal changes. In addition, divorce lawyers emphasize, they hope that the stresses and time-consuming duties of divorce will, at least temporarily, reduce concert income.

Distribute debt and student loans

Debts incurred before the marriage are owned separately and then jointly, in most cases. Credit card debt is shared, with some caveats, if the card is jointly owned. But in the US, more than 40 million borrowers have federal student loans. And this fall, interest payments that were frozen during Covid resume. That can become a bigger problem for some spouses than they might expect.

If one of the spouses takes out a loan to go to school, the debt can be considered joint. The decision is based on status, the length of the marriage, and whether both spouses sacrificed or thrived on the education paid for by the loan.

In most cases, courts assign responsibility for student loan payments to the spouse who made them. But if the divorce is contested, the judge has some discretion to determine who gets the debt.

calculate inflation

The biggest impact of inflation on divorce may be postponing it.

“I have clients who put off a divorce because of the economy,” said Marc Albaum, a Manhattan accountant. “One is a financier who took a break from Wall Street during Covid while his wife worked as a nurse; now he finds it hard to get back in and he says, ‘I can’t get a divorce because of the high costs of housing and health insurance.’

Inflation also reduces the purchasing power of spousal and child support; divorce can also cost more. So be sure to add a cost of living provision to your settlement. It links what you pay or receive to the Consumer Price Index.

Some states already include a CPI-linked cost of living provision, but make sure it’s the CPI specific to your city or region, not just your state. Consider whether you want to negotiate a “floor” and a “cap” in your agreement.

Budgeting for a layoff and the future

Unemployment in general is at a historically low level of 3.6%, but in certain industries there have been massive layoffs.

So the experts suggest doing a little guessing. If you expect to lose your job or see your income limited, consider delaying your divorce, if that is feasible. Existing awards are based on current employment and income. Of course, you can appeal if the circumstances change. Depending on the state, a 15% change in income, retirement or job loss may trigger a second review of the agreement. But the process can be expensive and time consuming.

In some states, Covid has racked up the backlog of contested divorces, the ones heading to the courts, from 6-8 months to two years. That’s a long time to be in limbo.