One of the most commonly contested issues in a divorce involves the process of dividing property between the spouses. If they have been married for a long time, or if they have substantial assets, the outcome of property division can affect their financial security for the rest of their lives. Some states follow a community property model, which generally involves a 50/50 split of the marital assets. Other states follow an equitable distribution model, which generally involves dividing the property in a way that is fair but not necessarily equal. Regardless of the approach that your state takes, issues related to the coronavirus crisis can complicate the process of property division.
If the spouses dispute any issue in a divorce, such as an issue related to property, a court will need to resolve the dispute. Since many family courts are closed or limited to emergency proceedings during the COVID-19 outbreak, the spouses may need to wait until their local court reopens before completing their divorce. Further delays may follow as the court catches up with its backlog of non-emergency matters. (If the spouses reach an agreement on all the issues related to their divorce, however, a judge likely will accept the agreement and turn it into an enforceable order, even if the court is closed.)
Valuation of Property
A key stage in the property division process involves determining the fair market value of each asset that is subject to division. In other words, the court will decide what a fully informed buyer would pay a fully informed seller for the asset if neither side is required to complete the deal. Calculating the fair market value can be straightforward under ordinary circumstances. Each spouse will retain experts to support their position, such as brokers, accountants, and property appraisers. The court usually values the asset based on the expert testimony that it finds most credible. Unfortunately, the economic uncertainty caused by the COVID-19 outbreak can result in starkly divergent perspectives on what an asset may be worth. This creates challenges for judges and makes the outcome of property division unpredictable.
To avoid this uncertainty, the spouses may want to consult a mediator who can help them reach an agreement. A divorce mediator is a neutral third party who specializes in helping spouses resolve complex and contested issues. Reaching an agreement can prevent assets from being depleted during litigation, which is a prospect that both spouses likely want to avoid.
Divorce During the COVID-19 Outbreak
If the spouses feel that they need to get a divorce as soon as possible, they can reduce the uncertainty related to property division by agreeing to divide assets by percentage rather than dollar value. This will distribute the risk related to an asset. Some assets cannot be easily valued during the COVID-19 outbreak, such as a business with an uncertain fate. In these situations, the spouses might be able to agree to value the asset at a set time in the future. They can integrate this plan into their agreement, which will make it enforceable.
The spouses can devise a Property Management Agreement to cover any real estate that will remain jointly owned after the divorce. This document should address issues such as how the listing price or rent will be calculated if the property is sold or leased, as well as how payments for repairs, maintenance, utilities, insurance, taxes, and other necessary expenses will be allocated between the spouses.
A separate but related issue is alimony, or spousal support. The spouses can agree on alimony payments following a divorce, as well as any time limit on payments. Some courts will not increase alimony after a divorce if the spouses have agreed to a certain amount, while other courts will adjust alimony if a substantial change in circumstances occurs. Each spouse may want to retain an attorney to protect their interests regarding alimony.
Postponing a Divorce Until After the COVID-19 Outbreak
Many spouses may prefer to wait until the coronavirus emergency subsides before finalizing their divorce. During this waiting period, they will want to ensure transparency in how their shared assets are managed. The spouses should identify their income sources, assets, and debts, while devising a plan for how income will be managed and how debts will be paid. They may want to stipulate in writing that each spouse can make significant decisions regarding shared assets only with the consent of the other spouse. If the spouses have a relatively amicable relationship, they may feel satisfied with a simple agreement. On the other hand, if the relationship has become hostile, the spouses may want to ask a court for a temporary order. (Again, this depends on whether their local family court is open for these matters.)
In some situations, a spouse may fear that their spouse will deliberately waste assets or make egregiously poor decisions in managing funds. They can prevent the depletion of marital assets by asking a court for a temporary restraining order, or a temporary injunction. Courts in some states issue these orders automatically when a divorce is filed.
