Guest Column

How our current inflationary economy affects divorce

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In many cases, divorce can be a very traumatic or unsettling life experience. But when you add an uncertain economy and inflation to the mix, divorce can be a taxing time, in more ways than one.

In my practice and those of my colleagues, we have seen the effects on divorce in almost every type of economic environment. We have had to adjust our strategies or our compromises accordingly. And the current economy is one of those times that calls for specific actions for specific conditions.

For example, in today’s economic conditions, there are several major divorce issues that are related directly to inflation and economic downturns. These include home mortgages, the value of retirement and non-retirement assets, and the cost of living as it relates to child and spousal support.   

First, take what is happening in the real estate market. With interest rates up, purchasing, selling or refinancing a home, which is usually one of largest assets in a divorce cases, is much more difficult. If one spouse wants to buy the other’s share in the home, issues will rise about a possible fluctuating home value or having to refinance with today’s interest rates.

When you look at how the stock market has dropped over the year, the current value of financial assets in regular financial accounts and in retirement vehicles are not what they were.

Then with the higher cost of living, items like rent, food, clothing, home maintenance, transportation could easily raise the amount for spousal or child support, more so than it would perhaps a year ago.

We have used, or at least seen, a few specific strategies in divorce settlements during times like these. In some cases, couples have delayed divorce, waiting for lower inflation and interest rates, before proceeding with an official split. The problems that arise with this strategy is that it is impossible to time the financial markets, plus the mental and emotional stress of remaining married could be too great.

Another strategy is to sell the home, which again could be difficult, split the proceeds, and divide all of the assets so that both parties share equally in the market risks.

Finally, there is another strategy used by couples who simply cannot afford to live apart. Obviously, it is more costly to run two households than one. So instead of divorcing, couples can sign a postnuptial agreement or legal separation agreement. The couple figures out a way to live together (upstairs or downstairs or utilizing a small nearby apartment) where they can share childcare and they can also stay on the family health plan.

Every party needs an experienced family law attorney when considering divorce, but when economic times are tough, like today, it really makes sense to hire an attorney who is board certified in marital and family law.