The Impact of Asset Division in a Divorce as a Result of COVID-19
The effects of the COVID-19 pandemic are far reaching as we are all in unprecedented and uncertain times. The financial and emotional impact on everyone will have enormous consequences. This is true of many who are currently going through a divorce or perhaps contemplating divorce as a result of these atypical living conditions. The potential impact of asset division in a divorce as a result of COVID-19 is potentially far reaching although uncertain in these unpredictable times.
The first issue that has come up in many households is the concern and anxiety around finances. It is important that families attempt to control finances and determine priorities that are relevant given the current financial and economic landscape. Preserving assets is certainly helpful in times like these and unnecessary waste would not be prudent. Although income changes for many may be temporary or long lasting, these changes could greatly affect financials during a divorce. These are conversations spouses going through a divorce can attempt to have and can determine reasonable expectations as well as needs so that everyone is on the same page.
COVID-19 will also affect property division and the values of many of your assets. Asset categories that will be affected include the marital home and other real estate; retirement accounts; mutual funds; stock accounts and brokerage accounts.
As the market is fluctuating daily there are options regarding division that can be utilized to divide these types of assets. The value of an asset to be divided can be determined as of the date of distribution. The date of distribution is the date that the account is divided. There can be an agreement or an order that the asset be divided based upon percentages. The parties can agree that they will determine the percentage that each spouse will receive and that they will identify the value of the asset on the date of distribution. Parties could also agree upon a fixed number for each party and then agree that there would be adjustments to that number based upon market fluctuations.
An asset such as real estate is valued based on the fair market value. Given the financial outlook, it may be prudent to value real estate based on current markets. It is uncertain that real estate values will be impacted either positively or negatively but certainly something to keep an eye on. There could also be delays in selling of real estate. The possibility of delays should be considered when determining division of property and possible carrying costs should also be contemplated.
Although financial markets are unpredictable, unstable and volatile, the distribution of assets such as a retirement accounts, mutual funds, stock accounts and brokerage accounts can be valued as of date of distribution and can include consideration for market fluctuation.
While many courts are closed and are not handling matters other than emergencies, now is a perfect time to try and negotiate a settlement in your case. We can use this time to move things forward and reach agreements. On the other hand, parties can wait and see what happens in the coming weeks before they move forward with anything definitive. Most importantly, everyone needs to stay healthy and do the best they can to protect themselves and their children emotionally and financially. If you have any questions or further concerns, we would be happy to help guide you through these uncertain times.
The information contained in this publication should not be construed as legal advice, is not a substitute for legal counsel, and should not be relied on as such. For legal advice or answers to specific questions, please contact one of our attorneys.