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The Impact of the Pandemic on Equitable Distribution

How the Pandemic Impacts the Division of Marital Property

New Jersey is not opening courthouses for civil trials until the end of September 2020. However, this does not mean that divorce proceedings are halted as the parties can still negotiate with each other and trials are still occurring in Family court. One challenge in particular that people may face right now is agreeing about property valuation and division.

It May Be Harder to Value Certain Assets

When a couple’s marital estate is valued, the fair market value of their assets forms the basis for the divorce settlement. When you have a marital estate that consists solely of stocks and bonds, a family law attorney will tell you that it is easier to come up with the value.

However, some marital estates contain other assets. For example, many couples jointly own a home. While houses are still being sold, real estate prices are hard to gauge right now because home sales are down in some markets, while very hot and booming in others.

A divorce attorney can tell you that it is even more difficult to value a business. When revenues and profits are down with an uncertain future, it may be tough to get a read on the fair  value of a company. Each spouse will have his or her own reasons for why the business should have a higher or lower value. Even if the value is set, the situation may change dramatically between now and the time when the agreement is signed. A family lawyer could easily argue that a low current valuation is only temporary.

A lack of liquidity and economic uncertainty will cast a shadow over the process of valuing any asset. For any asset that does not have a readily available liquid market, the spouses will likely disagree about its value. They might not accept the market price of the asset even where this value does exist.

The Pandemic Can Change Ratio of Property Division

Effects of the coronavirus can change the proportion of the marital estate that each party receives in the settlement agreement. This is especially true if one or both spouses have lost their jobs or suffered a significant pay cut.

One of the factors that determines how much someone receives in the divorce is his or her future earning power. If a spouse is believed to lack the ability to go out and earn a large amount of money, that person can try to make a case that he or she is entitled to a larger part of the marital estate. This has a dramatic impact when there is a large disparity between the earnings of the two spouses.

There are numerous scenarios in which job loss can affect the distribution of assets. If the spouse who was the primary breadwinner has lost his or her job and sees his or her future earnings prospects dimmed, that individual make an argument that his or her ex should receive less of the marital estate. The spouse who has experienced a reduction in his or her income will try to use it as a reason to get more assets. These are tough arguments to make, especially in New Jersey as assets are divided equitably.  In longer term marriages, equitably usually means equally.  While many creative arguments can be made, equity and fairness will carry the day.

It May Be More Difficult to Negotiate Over Valuation

The process of agreeing upon equitable distribution can happen when two spouses  sit down and negotiate with the help and advocacy of their attorneys. There are various issues to hash out before the two parties can reach an agreement. Even though some of the logistics are getting easier as people have had a chance to adjust, negotiations are still challenging.

Under normal circumstances, divorcing individuals would meet face to face and sit across a table to negotiate. Although it may have taken several sessions, and so to avoid court, in most cases the parties would  reach an agreement

However, social distancing requires that most or all of the negotiations be completed virtually. It may be easier for people to take a harder line when they are not physically facing each other. Moreover, scheduling issues in setting up these negotiation sessions can also affect any momentum that parties had toward achieving a settlement.

Spouses will need to adjust to virtual negotiations while they cannot meet in person for settlement negotiations. The virtual environment can make things challenging when dealing with a complex marital estate, but settlement is still absolutely possible. In fact, cases are being negotiated, tried, and settled every day.

People May Be Less Likely to Accept Valuations

While the stock market volatility may be lessening, asset prices have still experienced significant losses because of the pandemic. There may be great fluctuations in parties brokerage, retirement or other accounts. The pandemic has caused a new economic reality, and that is reflected in, and causes some skepticism regarding asset valuations.

Furthermore, even when an expert has assigned a value, a spouse has every incentive to push back if that is against his or her interest. He or she may even hesitate to accept a lower valuation today because the asset’s price can go back up in the future.

Debt May Play More of a Role

One or both  spouses may be carrying their own debt that was either incurred before or during the pandemic. A divorce attorney will tell you that New Jersey is a state where marital debts are also subject to distribution.

If the pandemic has affected one spouse financially, he or she may have greater trouble with paying back his or her loan or debts. Accordingly, that person’s divorce lawyer may argue that he or she should be entitled to a larger amount of the marital estate during property division. Debt can have greater consequences for a spouse in times of economic uncertainty when his or her income has decreased or disappeared.

Almost 99% of divorce cases are finalized without the parties having to participate in a trial. Most people believe that the costs of going to court do not justify the benefits. However, some spouses may need the prospect of a prospective trial hanging over their heads to agree to a settlement. This gives them a sense of urgency. Since the legal system is experiencing backlog right now, the prospect of a trial is not as likely, causing one or both of the parties and their family law attorneys to take a more reasonable negotiating position.

To learn more about how COVID-19 is affecting equitable distribution and how it can impact your divorce, call Jeralyn Lawrence of Lawrence Law at (908) 645-1000 to set up your initial consultation.

 

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