It seems the ripple effect of coronavirus has infected everything, and as you well know, divorcing individuals are not immune. As you navigate the slow reopening of courthouses, here are six areas you can help your clients re-assess to prepare and protect themselves.
1. The Divorce Itself
As courts continue to implement new ways to conduct proceedings, remember your clients are hearing various stories of how their friends’ divorces are moving forward – or at standstills – due to their courts which may be in different jurisdictions. Your advice on how to move forward on their parenting agreement and financial negotiations so that their case will be processed as fast as possible is invaluable to avoid them feeling like they are stalled indefinitely.
What You Can Do: Be proactive in helping your clients understand how the new rules affecting your jurisdiction impact their case including their fees and timeline. While you have likely settled into the new normal, your clients many need multiple updates on what they can do to keep their divorce progressing.
2. Their Finances
Obviously their retirement and investment accounts along with any business interests may have dropped significantly from what they were worth at the market high around Valentine’s Day. The ongoing uncertainty may mean values could see-saw for a significant amount of time, making it impossible to predict exactly what anyone will end up having.
What You Can Do: Remind them you will help create the best possible settlement for them regardless of the outcome of the uncertainty. Consider whether they should talk to their financial advisor for rebalancing and tax planning opportunities. While stocks and mutual funds are down, investors can sell them and immediately reinvest in a similar, but not identical, fund so that when the market recovers their portfolio will as well but they will owe less to Uncle Sam. This is particularly important with divorcing individuals as they likely will need to adjust their portfolio post-divorce to reflect their new single financial situation. Remind them to ensure they have enough cash for an extended downturn and to check their credit report. If they are fortunate enough to receive a bonus or distribution, using extra cash to invest during this buying opportunity may be a smart decision if the couple can agree. Encourage them to investigate the benefits afforded by the CARES Act which allows for loans for small businesses, penalty-free withdrawals from retirement accounts, and other benefits that will soften the blow from the crisis. Your suggestions of solutions broader than the legal issues of their case will demonstrate you empathize and care about their full life going forward.
3. Their Job and Paying the Bills
While it’s impossible to forecast just how long and deep the recession will be, every recession ends up with lost jobs, less money for many who are employed, and the risk of additional future layoffs. The stock market tends to rebound first, then the economy, with employment being the last to fully recover. You undoubtedly are answering many questions about how a client or their spouse losing their job or experiencing a dramatic change to their income will change support payments and complicate negotiations. Questions surrounding unforeseen issues like access to health insurance or short-term cash flow to pay bills may suddenly be critically important.
What You Can Do: Share information regarding their options for health care after divorce and encourage your client to work together with their spouse to maximize their family’s combined household income. Where appropriate, encourage them to use this time to create an impressive resume, brush up on skills like Microsoft Excel, or take online classes.
4. Their Plans for the House
Deciding to keep the house or sell it is a complex decision even in the best of times. Due to their focus on the emotional ties and social implications of a potential move, we often see divorcing individuals underestimate the financial cost to maintain the house, pay utilities, and real estate taxes as well as the potential costs and income tax issues to sell and relocate. The pandemic just added a huge wrinkle to those calculations. With the housing market in a temporary freeze, it is much harder to predict what the near and long-term impacts will be on home prices after the crisis passes.
What You Can Do: Encourage them to consult with experienced realtors to be prepared to rethink their entire decision if that’s what will make the most sense in the new reality. If they decide to keep the house, work with their spouse and their attorney along with a Certified Divorce Lending Professional (CDLP) to see if they can refinance at a lower rate. Many lenders will not refinance during a divorce. Recommend they brainstorm creative ideas with their realtor for virtual that showcase their house at its best while keeping everyone safe.
5. Their Kids
As they continue to grapple with the unforeseen changes upending schedules and routines that may have taken you months to craft, continue to focus them on how it’s more critical than ever to work with their spouse to create the best path for their children’s present and future wellbeing. While they will eventually no longer be a spouse, they will always be a co-parent and doing what’s in their children’s best interest is likely ultimately in your client’s best interest. Educating them that no matter how comprehensive their parenting schedule is, they will have many future changes in their kids’ schedules as they mature, attend different schools, and participate in different activities.
What You Can Do: Encourage them to be intentional about what memories they want to create for their kids. This will likely be the time they remember most about their family before it officially became two households. If they have enough cash and a reasonable spouse, suggest they talk about leveraging this bad market as an opportunity to invest more for their kids’ college in a 529 account.
6. Their Family’s Safety and Health
You likely have many cases where spouses are not on the same page regarding social distancing and staying home. Explain that many happily married couples have conflict over differing opinions on social distancing and it’s common to have separate rules for each parent’s house on some issues. Highlighting that showing respect and being open to all possibilities will set the right foundation for their future co-parenting relationship.
What You Can Do: Be proactive with all clients in sharing stories of how couples have successfully navigated conflicts on social distancing. Encourage them to get some physical activity every day and use this time to create a habit of self-care. Going for a long walk to clear their head or even punching a pillow can process the anger and resentment in a more healthy way.
How can we support your practice?
As you well know, managing the financial aspects of divorce is often time-consuming and complex. Let’s talk about how we can save you headaches and give your clients confidence they obtained the best financial outcome possible. I look forward to working together!