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The Economic Impact of COVID-19 on Divorce
As uncertainty becomes the new normal, those of you going through the already tumultuous process of divorce may have questions about how this pandemic and the economic shutdown will affect your case. Staying in touch with your lawyer during this difficult time will help you talk through and anticipate the economic impact of divorce during COVID-19.
At Russell, Krafft & Gruber, LLP, we are fully available to answer questions about how the current COVID-19 situation may impact ongoing divorces. Even though our courts are operating on a limited basis right now, it is still a good time to ask questions and get sound legal advice so you can be prepared. We need to identify what we can and anticipate strategies for dealing with matters that may come up in your divorce.
This post will highlight the main aspects of the divorce process that will be most affected during this pandemic: equitable distribution and valuation of assets. Some distribution and valuation issues affected by this crisis are complex, and some are as yet unknown. So, in future blog posts, I will explore some of these issues in greater depth.
But for now, let’s consider overall how COVID-19 may impact your divorce case.
Will COVID-19 change the percentage of the assets I may be entitled to?
Possibly. The Divorce Code enumerates eleven factors the courts should consider for Equitable Distribution, which means the fair division of assets and debts. There are also seventeen factors it considers for Alimony. Perhaps the most significant factor in both Equitable Distribution and Alimony is the employment situation and income of each party. Obviously, the shutdown of many businesses is impacting both significantly.
Being out of work during this crisis (depending on how long that impact lasts) may well be a factor in your divorce. In the interim, you will want to speak with your attorney both about your current situation and the future impact it may have. For example, you may
- regain some, but not all aspects of your employment
- be in a job that looks different and has altered expectations
- be in an industry that will not be able to rebound fully, decreasing your hours worked or overall pay
- have health issues that put you at risk and impact your ability to work, or
- need to care for others who are ill or children who are not in school.
Some of these issues may only be temporary, but others may not be. Depending on how long COVID-19 lasts, these may be significant considerations in determining a fair division of assets and debts. You will want to keep your lawyer informed so they can best represent you in the divorce process.
Will COVID-19 affect the value of my assets?
Most likely, yes. The volatile market and uncertain business futures are also impacting the values of property. The courts consider these values when calculating Equitable Distribution. Whether you are negotiating to resolve your divorce issues or litigating in court, you should stay on top of the changing values of your property.
From an Equitable Distribution perspective, the economic fallout of this pandemic will impact a few categories of assets in particular:
Retirement Accounts
COVID-19-related downturns have dramatically affected retirement accounts like IRAs and 401Ks because they are tied to the stock market, significantly reducing their value. Keep monitoring these accounts and let your counsel know of their status.
Real Estate
The current situation may well impact the values of any real estate you have as part of your marital assets. You may want to consider updating the value of your property by conducting a new appraisal.
Business Entities
Finally, there may be a business entity included as part of the assets in your divorce. COVID-19 may affect many of the value considerations in business valuations.
All three of these categories of assets have unique valuation considerations in light of the COVID-19 crisis. In future blog posts, I will be discussing them in more detail. If you have questions about how the pandemic may impact your custody agreements, check out my colleague’s article Custody During COVID-19: What’s Best for the Kids?
For now, be aware of the potential economic implications of COVID-19 on property distribution and asset values in divorce cases, and keep your attorney informed. We do not have all of the answers right now. However, working with knowledgeable counsel and asking the right questions will keep you on the right track in these times of uncertainty.