When a couple decides to divorce, the division of what is yours, mine, and ours is an inevitable next step. Today’s challenging economy has made this step even more difficult because, for many couples, fewer assets are left to divide. Out of fear, people are holding tightly onto what’s left and are less willing to share it. When tensions in a household are at an all-time high because of an impending divorce, the ever-present stress of dwindling funds will escalate that tension even further. Whether it’s about the divorce, finances, or both, arguing back and forth takes time. And in a divorce, time is money.
Dallas family lawyers are acutely aware of the effects the economy has had on divorce. As one Dallas divorce attorney, Jeff Anderson describes it: “In some ways, this economy is like a fire sale on divorces for at least one of the spouses.” In the recession’s early days, the trend was to postpone filing and keep assets combined and protected. As a result, local divorce attorneys reported a slight drop in business. In the end, these couples have tired of waiting around for better economic news and have filed for divorce anyway, keeping local family law attorneys busy as usual.
“People temporarily froze from fear, but that didn’t necessarily make them better spouses or want to work on their marriages,” says Mike McCurley, a board-certified family lawyer with McCurley Orsinger McCurley Nelson & Downing, L.L.P. “They held back for a while, but that dam has long since broken. People are becoming used to the economy as it is now, making adjustments to their portfolios, and going on with their lives.”
Polly O’Toole, a partner in the family law firm, Atkins O’Toole & Briner, says she had several clients tell her they were going to take the “wait and see” approach about their divorces when the recession initially hit. Unfortunately, those clients found their way back her office.
“Financial troubles create pressure in a family,” O’Toole says. “The stress level in a household hosting a potential divorce along with financial problems is exponentially high. And as we all know, stress and tension lead to conflict. And conflict without resolution often ends in a divorce that is much uglier than it had to be.”
Divorce may be inevitable, but it doesn’t have play out like the movie, “War of the Roses.” In an effort to preserve your sanity – and your assets – it’s usually beneficial to reach a settlement because, again, thanks to a down economy, divorce isn’t what it used to be. A 50/50 split of assets is harder to come by when there isn’t much to divide. In many cases, divorce forces a couple to realize they are cash-poor and not worth what they once thought, due to plunging real estate values and the ever-changing stock market.
O’Toole advises those con–templating a divorce to hire a lawyer who takes a hard look at your assets and liabilities from day one and even bring a few years of tax returns and a list of your assets and liabilities to the initial consultation, if possible.
“These days, some couples have less to divide in a divorce,” O’Toole says. “Many of my clients are finding that stock market fluctuations and depressed real estate values have changed their family balance sheets, and not for the better. All assets are not created equally. For example, retirement dollars cannot be accessed without tax implications, so you would never want to trade retirement dollars for savings account or certificate of deposit dollars. The point is that you must hire an experienced divorce attorney who understands how to classify assets. There are not many guarantees in a divorce, but one thing is for certain—most people wind up poorer by about half. The lawyer you chose to represent you should be able to articulate a plan for helping you to preserve as much of your net worth as possible.”
Hiring a financially savvy attorney is invaluable in determining and valuing the marital estate and the tax consequences of the division of assets and liabilities between the parties, says Edwin W. Davis, a Dallas lawyer board certified in both family law and tax law. While divorcing couples have long tried to hide and divert assets, he is seeing it happen more frequently due to panic in this economy.
“In hard economic times, one spouse may take actions the other spouse never expects,” Davis says. “We are seeing more cases where one of the spouses attempts to hide assets and/or divert funds. The mechanisms utilized are sometimes very elaborate. It is important to review and analyze asset transfers, fund withdrawals, entity contributions, and distributions from or between entities. I am always looking for a paper trail that may lead to finding additional assets.”
Whether you’re the “moneyed” spouse or the “nonmoneyed spouse,” wanted the divorce or didn’t want the divorce, once you realize how much a divorce will impact your financial future, it becomes critical to choose an attorney who is a zealous advocate for your rights. Many of McCurley’s clients come to him with an idea about what kind of divorce they want (such as collaborative vs. litigation) or with a notion of what they’re entitled to based on something they’ve heard. When choosing a lawyer, McCurley advises hiring one who spends time educating you about the law and your options so you can make a choice that will positively affect you now and in the future.
“Avoid hiring a lawyer who specializes in only one type of law or who doesn’t have access to other lawyers who specialize in different types of law,” McCurley says. “Today, because of the Internet, people have a better-than-yesterday’s education about their legal options, as far as what to expect and their rights. You really can’t make up your mind what type of divorce method to use until you consult with your attorney about the facts of the case, your spouse’s personality, the lawyer on the other side of the case, and the assets at stake. Only then can a lawyer properly explain to you every option so that you can make absolutely sure you’re pursuing your case in the best, most efficient way possible. The decisions made during the divorce will likely affect you for the rest of your life, so it’s crucial to not sacrifice quality and hire the best you can afford.”