Under normal circumstances, soon-to-be ex-spouses need a roughly 30% increase in income, on average, to maintain the same standard of living they had before needing a divorce law firm. However, we are no longer under normal circumstances. The pandemic is further complicating financial pictures for individuals planning for their post-divorce lives.
The same considerations that would have guided your post-divorce planning before the pandemic simply no longer apply. You’ll now need to account for a new reality that will govern many of your decisions. You need to be aware of changes in the financial landscape that can impact both how you negotiate your divorce agreement and how you live your life afterward.
One byproduct of the COVID-19 crisis is that there is little housing availability. Surprisingly, home prices have gone up across the country. Many people are staying put, which means that those who need homes are competing for a scarce number of houses on the market.
Divorcees looking for housing could be in for a challenge. Even rental apartments can be harder to secure as many tenants are staying put. As a result, you should consider housing prices to be volatile. If you’re renting, the price that you pay today may not be the price that you pay on your next lease. A scarcity in available houses usually filters through to rental prices within a year or two.
If you and your divorce attorney are negotiating an agreement where you are moving out of the marital home, know that you may need to budget more for housing. If your ex-spouse is moving out, your divorce lawyer will tell you that their increased housing costs could affect the division of assets.
You do not even need to consult with your divorce attorney to know about the state of the financial markets these days. In a word, they are volatile. If you are relying on your assets to grow for your future financial plan, be prepared for some bumpiness. While short-term problems do not always spell long-term doom, issues could arise if you need to rely on your investments in the coming months. A pandemic-inspired recession may continue to affect the stock market.
Fluctuating asset prices could have several ramifications. They could even raise or lower your post-divorce tax bill. Before ending your marriage, you and your family lawyer need to run through multiple financial scenarios. Depending on how your investments perform, your post-divorce financial life could look very different. It’s wise to consider the worst-case scenario.
Issues surrounding health insurance could get pretty complicated if you have young children. The agreement that your divorce lawyer negotiates will specify which parent is required to provide health insurance. However, the family must consider what will happen if that parent loses their job and cannot provide insurance. The cost of COBRA coverage, which may allows eligible employees and their dependents to continue on work insurance plans even after a layoff, is prohibitively expensive. Such matters must be accounted for in your divorce agreement.
Moreover, if you end up having to buy health insurance for yourself since you can no longer remain on your spouse’s policy, be aware that the pandemic is causing serious price hikes in 2021. You will no doubt need to pay more for insurance. Thus, whatever price you are quoted now for a policy may not be the same in the future.
When couples have debt jointly in both names, each ex may be responsible for some of it. New Jersey is an equitable distribution state, and debt is considered subject to equitable distribution.
The rough economic circumstances caused by the pandemic may lead to struggles with debt after the divorce. If the worst-case scenario happens and you lose your job, you might even be faced with bankruptcy. There is a chance that you will end up being responsible for some of the marital debt after the divorce. Your post-divorce planning needs to consider the impact that this debt will have upon your finances. Make sure that you have a high enough income to carry the debt load that you’ll end up assuming. If there is even a doubt, confirm that your savings are sufficient enough that you can keep making payments on the debt without risking the possibility of bankruptcy.
If you are paying or receiving child support, the ultimate payment could be subject to change in your post-divorce life. While modifications are not always easy to get, it’s possible to alter the amount of child support if there is a substantial change in one spouse’s income.
As long as the pandemic is in full force, you always need to plan for the worst- case scenario. If your former spouse is paying child support and they lose their job, they can always file a motion in court that could lead to a reduction in the payment obligations. Similarly, if you’re paying child support and your ex-spouse loses their job, they could file for a modification that would lead to you paying more child support.
One area where couples often clash during divorce negotiations is over their retirement accounts. The spouse who contributed the bulk of the funding in these accounts may think that they are entitled to it. However, the other spouse will not want to be left out in the cold for retirement.
If we are in a prolonged period of economic uncertainty, you will need to consider the impact that volatile markets may have on your retirement accounts. There are many other pandemic-related byproducts that might hurt your efforts to retire.
Nobody is clear on how the economy is going to emerge after a vaccine is released. At Lawrence Law, we are family law attorneys as opposed to market prognosticators. However, we do need to advise our clients to consider the effect of underperformance in their retirement accounts while they are contemplating their post-divorce financial lives. If your financial assumptions are overly rosy, you may end up working beyond your ideal age for retirement.
Before you settle the divorce, you should make sure that your retirement calculations are not considering unattainable inputs. In other words, do not settle for less because you think that the market is going up without interruption. There is much uncertainty in the post-pandemic world.
Due to these uncertain times, it’s more important than ever to partner with a family lawyer before finalizing a divorce. Contact Lawrence Law at (908) 645-1000 to learn more about how a family law attorney can help you prepare for your post-divorce financial life. While we have offices in Watchung and Red Bank, we have adjusted our services to meet all social distancing needs.
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