5 Tips to Deal with Divorce in a Downturn

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  • Recession and divorce Thirty-eight percent of couples considering divorce or separation have postponed those plans due to the recession, according to a study released earlier this year by the National Marriage Project at the University of Virginia.

    The reason? Divorce is expensive, and in a tough economy, families don't have extra money to spend. Those couples who choose to go through with divorces are facing new financial challenges, such as determining what to do with upside-down mortgages or establishing individual credit in a tougher regulatory environment.

    "The economic downturn has made divorce more complex than ever," says Lee Block, a national divorce coach and the writer behind the Post-Divorce Chronicles blog.

    Here are some of the common financial challenges faced by couples divorcing in an economic downturn along with experts' advice for dealing with each one.

  • Protecting assets It was once standard for divorcing couples to sell their assets, such as homes and stock portfolios, and divide the profits. But in today's market, when many homes are worth less than the mortgages held on them and the stock market outlook changes every day, few couples want to watch their accumulated savings go up in smoke. Rather than allowing a judge to require them to sell assets, some couples considering divorce are drawing up post-marital agreements that divide their common assets between them, says Steve Mindel, managing partner specializing in family law at Los Angeles-based law firm Feinberg Mindel Brandt & Klein LLP.

    Similar to a prenuptial agreement, a post-marital agreement lists certain marital assets as the husband's property and certain assets as the wife's property. While Mindel often organizes such agreements for business owners who want to protect their personal assets from potential business losses, recently he has created numerous post-marital agreements for couples contemplating divorce.

    "A lot of the fighting that takes place in family law court is the result of fear -- fear that one person will end up with more money, fear that one spouse will try to take the children away," Mindel says. "Having a post-marital agreement takes away a lot of fear, because both spouses have already agreed which assets they will keep and which ones they will give up."

  • Selling an undervalued home A married couple's largest asset is often their home, Block says. In most cases these days, the home's value is either down tremendously from what it was a few years ago, or it's worth even less than the mortgage balance. Either way, selling the home and splitting the difference may not be the wisest financial strategy at the moment.

    Some couples choose to rent the home to a third party and split the rent until the market improves, says Jim Toto, partner in the New Jersey office of accounting firm WeiserMazars.

    Block says some couples with children choose to "time share" their homes, with each parent taking turns staying there and moving themselves instead of the kids.

    Unable to sell their home or afford separate living quarters, many divorcing couples are simply living together longer. "It's tough on both the couple and the kids, because you have two people who are essentially suing each other and living together," Mindel says. "Even though money is tight, spending a few hours with a counselor or other mental health professional can help people deal with it."

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