COVID-19 has put pressure on family dynamics, and relationships of all sorts are changing as we head into the second year of the pandemic. The experience has brought disagreements about raising children and financial stress to families around the world, two of the most commonly cited reasons for divorce. Studies have shown an increase in divorce rates in post-lockdown China and in parts of the EU. Marriages in the U.S. appear to be stressed but — at least so far — they are not breaking at alarming rates; the U.S. divorce data for 2020 appears to be continuing in a downward trend since the 1980s.1
Closer to home here in Oregon, a recent study from Bowling Green University indicated that rates of new marriages and divorces were both down substantially for Oregonians in 2020.2 Part of the slowdown is likely due to the lockdown and inaccessibility of many institutions in March and April of 2020, but the study showed there was not much pent-up demand for either when things reopened in the summer.
It is too early to tell what will happen with divorce rates in the near future. Some experts suggest that couples are staying in troubled marriages because there is so much uncertainty about what post-marriage life looks like during a pandemic. For some couples this may be because one or both are out of work due to the lockdowns, while others may be dealing with a spouse who is (or has been) ill from the virus. Many couples report having differing views on social distancing and minimizing contacts, while others are just tired of each other after sheltering in place together for a year. These factors may lead to increased divorce rates as we move forward (especially if schools are able to stay open and the stress around figuring out the logistics of “post-divorce distance learning” is relieved).
We have seen a handful of clients and friends go through divorces over the last year, and want to offer some practical finance-related steps that individuals can take to save a little money and get some peace of mind through the process:
- A surprising amount of billable time goes into tracking down values of easily defined property like investment accounts, real estate, mortgages, and life insurance. In many cases, one spouse does not have access to financial records, and it may be necessary to have attorneys and paralegals gather the information. If you do have access, you will save yourself a good deal of time and expense if you can do the work of gathering as many of the following as possible:
- Recent statements of banking and investment accounts
- A listing of real estate addresses and values (including purchase price and current mortgage information)
- A summary of life insurance and retirement accounts (and a list of who the beneficiaries are on these policies)
- Information on any artwork, collectibles, or other personal property of value
- Current estate plan documents
- One of the most important steps our financial planning team takes with clients going through a divorce is putting together a cash flow plan that incorporates the post-divorce balance sheet and budget. This exercise is great for bringing some peace of mind to the process and can assist in making informed decisions about employment and living expenses. This ought to be a dynamic process, where models are regularly revised to reflect the new reality.
- Divorce often puts individuals in a position where they must make decisions about things they have not previously had to deal with. This may include investment and retirement-related choices. It is important that the individual find an advisory relationship that meets them where they are on these items and can educate from an appropriate starting point. Investing is only as complicated as you want to make it, so finding someone who speaks to you at your level can be a calming factor in an unsettling time.
- Divorce has a material effect on tax return filings and on estate planning documents. Be prepared to invest some time and money getting things arranged to fit your post-divorce family structure. This can seem daunting, so selecting a team of advisors you are comfortable with is critical.
Divorce is a draining and difficult process. Appropriate financial planning and a little bit of education about the money side of things can go a long way toward easing some of the consternation and turmoil. We have experience guiding couples through divorce from building the initial asset schedule to the ultimate division of assets. We have some incredible relationships with attorneys and CPAs here in the Pacific Northwest that can also assist as part of your team to help guide you through a divorce. Please contact our team if our experience and/or our professional network might be able to help you in any way.