I suspect that the economic meltdown that began in earnest in mid-September is a factor in causing many couples to “hunker down” instead of starting divorce mediation or a collaborative divorce until their balance sheets will improve and their homes will regain value and liquidity.
My anecdotal evidence is a sudden fall-off in the number of inquiries from spouses interested in mediation and non-litigation divorce options about that time as well as similar observations reported by my colleagues “over coffee” and at various conferences. I can also reflect on my personal reluctance to open up my retirement statements when the only unknown is how far my mutual funds have fallen.
For many people, their house is their principal asset. House equity provides the grease to overcome the truism that it’s more expensive to live under two roofs than one. If the house can’t be sold at a price that provides the wherewithal to buy replacement housing, that’s an impediment to starting a divorce. Add in the reported tightening up of lending requirements, the decision to delay may appear to be the best choice for many couples.
I believe these fears are largely unfounded in light of the Seattle housing experience and reduction of mortgage rates expected from the Federal Reserve’s decision to lower a prime lending rate almost to 0%. Unlike many areas of the U.S., Seattle and Bellevue area housing prices have fallen only modestly, reflecting solid employment and continued demand for housing. Among major metro areas, Seattle’s real estate was rated the best in the nation as a prospective investment according to a late October 2008 report by Price WaterhouseCoopers and the Urban Land Institute.
And there are alternatives to selling the family home that can be explored with the help of a skilled divorce mediator or collaborative lawyer. One scenario is for the spouses to continue to own the home after the divorce as partners until sale is triggered by an event (for example, the youngest child reaches college age) or a date (for example, 5 years). The spouse staying in the house pays all or part of the mortgage and both share fairly in the proceeds of sale.
As for losses in retirement accounts, typically securities and mutual funds do not have to be sold when spouses are divorced. Instead, they can be split “in kind” so both spouses can benefit from a rebound in stock and mutual fund prices. So while the net assets of the couple may be less than they were a year ago, that is no reason to put off implementing a decision to divorce. Indeed, a rebound in the financial markets may occur during the time that divorce mediation typically takes to achieve final agreements on a parenting plan, property settlement, and spousal support. And the date the couple’s property is to be valued is a mutual decision by both spouses in mediation and the collaborative divorce process.
So the recession is no reason to stay under one roof in unhappy circumstances or put two lives “on hold” for an undetermined time. Far better to start the process, identify the issues to be resolved, and move toward solutions than to bury “heads in the sand” based on unfounded assumptions.
