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 wrestling with the emotional strains and financial challenges of divorce.
If you think budgeting and saving are hard in this economy, imagine splitting up in it.
The 2023 economy 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 uncertain than usual on how to divide assets.
The current climate calls for strategy, flexibility, and compassion, according to real estate brokers, accountants and divorce attorneys. You can’t quite inflation-proof your divorce, they noted, but there are steps to take to blunt the economy’s impact on it.
Selling a house
For many Americans, their entire fortune is tied up in where they live. But the family home has been falling in value, at least in some regions. What if you must sell anyway? Build provisions into your separation agreement that establish when and to what degree the home’s price will be marked down if it isn’t selling, Jaime Davis, a veteran divorce attorney in Raleigh, North Carolina, told CNN. The last thing you want is for the market to be softening and you have to reach your ex before you can react.
It should be in writing that spouses will cooperate with showings and maintain the home in good condition. Experts stressed that a speedy sale is preferable as divorce proceedings tend to get more contentious as they drag on.
Refinancing your mortgage
It’s rarely been as inexpensive to buy out your spouse to keep the family home. But a spouse keeping a home often has to get their partner’s name off the mortgage.
According to credit rating agency Experian, removing a cosigner from a mortgage “almost always requires paying off the loan in full or refinancing by getting a new loan in your own name.” Some mortgage loans are assumable without refinancing, like Veterans Affairs loans, but not most.
If you refinance, you’ll also have to qualify for a new loan based on one income. Rising interest rates have made that very pricey, according to Scott Trout, divorce attorney and CEO of Cordell & Cordell. A couple that paid 2.5% in 2019 is looking at refinancing now at 6.5% to 7%, he said.
The fastest way to nudge a mortgage interest rate down is to raise your credit score in advance of applying. Pay down, or pay off on time, your credit cards, as banks report to credit agencies swiftly.
Appraising what’s inside
Here’s a cautionary tale of the super-rich: Oil magnate Sid Bass divorced his wife Anne in 1988 after 23 years of marriage. Anne Bass was awarded a sum of money, the house and its contents.Those contents happen to include Edgar Degas and Mark Rothko paintings. Last year, an auction of the art totaled $363 million.
There is probably not a Degas in your attic. But other collectibles may hold value. “People don’t know what they have, they have no idea,” said Victor Weiner, former head of the Appraisers Association of America. “Check the walls, check the attic, check everything.”
Valuing stocks, bonds and retirement assets
There’s a huge amount of emotion involved in splitting up assets that were acquired during a marriage. The seesaw economy hasn’t helped. Your stocks and bonds may have been worth much more just a couple of years ago. And, on the flip side, it may be heartbreaking to discover that appreciation on assets you owned long before your marriage or your retirement fund might be treated as community property.
But “it’s far better to divorce when the bulk of assets are at their lowest; sell now and keep [what you can] when its going higher,” said Trout. “A trap that clients get into is valuing a $100,000 401k at $100,000” when splitting funds, and not taking into account future appreciation or tax benefits,” he said.
Experts say that trying to pick the best time to sell, or wait out a division of assets until after a recession, will result in a long wait and lots of uncertainty.
Predicting income in the gig economy
Courts typically look back at two, or sometimes three, years of income to determine spousal support or child support payments. But the pandemic shutdown threw that math way off.
So has the rise of irregular income through independent-contractor wo