TO WAIT OR NOT TO WAIT: THE ECONOMY'S EFFECT ON COUPLES CONSIDERING DIVORCE
Guest post by Alexandra M. Coglianese: With the country focused on the economic impact of a sinking stock market, loss of jobs and inability to make ends meet, married couples across the country are facing yet another issue...what to do about getting divorced. Couples nationwide are grappling with the pros and cons of pulling the proverbial trigger and getting the divorce process underway or staying in a holding pattern in hopes that the cyclical effect of the United States economy will turn the present economic bust into an eventual economic boom. There is great debate amongst matrimonial attorneys and sociologists alike as to whether divorce rates increase or decrease during times of economic crisis. Their conclusions are widely divergent depending upon which socioeconomic sector of the population is being observed. For lower to middle class individuals, the divorce rates tend to freeze as economic conditions weaken. In contrast, for the upper middle class and high net worth individuals, divorce rates often remains the same, or even spike to a slightly higher level. The reason for the disparity? It all comes down to money... how much of it you have, how much of it you don't have, the extent of your investments, the dollars in your bank account. Couple those elements with strategic considerations...do I let my business decrease in value even further in hopes of reducing my support obligations, or if we have extensive assets, do I pull the trigger now, liquidate everything, and hopefully walk away with some assets before they are all depleted? No matter how difficult the parties' marriage, there are personal and economic realities that need to be faced before traveling down the path to divorce. For most couples considering divorce, one of the first sobering realizations is that if they are struggling to maintain their current household, (i.e., paying their mortgage, bills, insurance, etc.), it will be difficult, if not impossible, to maintain and support a second household post-divorce. A second concern, and arguably equally as important, is debt. Most couples have it...and lots of it. With multiple mortgages, many couples owe more on their home than their home is actually worth. Couple housing debts with a crumbling housing market, credit card debts and other miscellaneous home and personal loans, and couples are swimming in a sea of financial chaos that only gets more difficult when they begin to realize the financial impact a divorce will have on an already struggling household. Thus, couples finding themselves in this type of housing and economic situation often find themselves between a rock and a hard place debating whether it is more important to escape their irreparable marriage, doing so with little if any financial security, or staying together in hopes that a housing turn around will occur while they are simultaneously paying down their debt. Arguably, the economic necessity of continuing a marital union that has for all intents and purposes already come to a conclusion is a strain on both parties. However the financial implications of divorcing in the current economy are forcing many couples to stay together. In contrast, although upper middle class and high net worth couples still suffer an economic loss in terms of their overall net worth, these couples tend to fare much better than their lower and middle class counterparts on a financial whole. Although they might have lost a couple million in the stock market, they typically have a couple more million divided up in various homes, businesses and bank accounts. Most of the couples that fall into this category are professionals, (i.e., doctors and lawyers), who typically do not bare the brunt of the economic impact as acutely as their lower and middle class counterparts. The fact that these high net worth couples have multiple asset bases and liquidity in their bank accounts, makes individuals in those marriages, more likely to proceed with divorce. They are conscious that they might not receive as much in total distribution as they would have 5 years ago, when their home values were soaring, their investment portfolios steadily climbing and their bank accounts growing, however they are willing to take a monetary loss in an effort to avoid further economic loss and officially end their marital ties. So what does this mean for you? If you are thinking about divorce, there are an array of serious financial factors that must be considered. Having a firm grasp and realistic understanding of your present financial status as a married couple is critical. You cannot squeeze water from a rock. No matter how difficult your marriage may be at the present moment, and no matter how eager you are to have it dissolved, you cannot escape your joint economic reality, pre-divorce, and your individual economic reality post-divorce. Given that every couple faces different financial situations and an array of intangibles that cannot be accounted for, it is crucial that a couple's decision to get divorced take into account the full scope of financial implications.