The decision to divorce is never easily reached or happily sought. The vast majority of spouses voice concerns—they worry about their children, they worry about themselves, and they worry about life after divorce.
Change is a big deal and as such, should be orchestrated with reason and knowledge. At CMDR, we believe mediation offers the opportunity to divorce with care and intelligence and emerge with the problem-solving tools to build a new beginning.
Yet, as we continue to battle with the coronavirus, and the upheavals it has engendered in our daily lives, we know that it is our responsibility, as mediators, to help our clients broaden their outlook and to customize their agreements in order to deal not only with the present reality, but also to be prepared for a more normalized future. Admittedly, we, at CMDR, have always advocated for divorce agreements that include provisions for change. However, now we are suggesting that we fashion terms for our current sterilized lives and our lives after the virus.
To achieve this objective, we offer some tips to guide your thinking:
Budgets provide important data: they illustrate both discretionary and essential expenditures in an effort to portray what each spouse and the children need, in after-tax dollars, to maintain their standard of living. We suggest that divorce couples compile their present budget as it is in 2020, but focus on their budgetary needs when normalcy returns. This year has been very different: we are driving less, doing less and in many instances spending less. As such, divorcing couples should look back to expenses in 2019, unless for some reason that was an atypical year, and include the children’s lessons and activities, child care costs, driving expenses, entertainment and vacation, work-related expenses, and so on.
If you are employed: Think honestly about your employment situation:
Has your salary increased?
Is there a scheduled date for salary review or return to pre-Covid level?
How is the business doing in 2020?
What is your employment outlook for 2021?
If you are unemployed, you need to undertake the same kind of analysis: Project what you honestly think are your options and opportunities.
Do you need to consider a career change or career development?
Are these costs involved in making a change?
In considering each spouse’s employment situation and/or prospects for employment, you need to be realistic, not provide a doomsday scenario with the hope of paying less support or receiving more support. If you cannot project your employment situation beyond its current status, then you need to discuss provisions in your agreement for recalculation if and when the situation changes. This kind of inclusion goes beyond more traditional support recalculation terms. The discussion is broader and may include contingencies for drawing on assets or the need for stay-at-home spouses to secure employment.
Assets: In determining the division of assets, you may need to speculate about the future. If, for example, you believe that the best is in the past and that the good old days will never return, as a couple, you may need to decide priorities with how to deal with this dismal prognostication. Should you put aside assets for funding child-related “musts?” Also think about:
Do you need temporary access to cash? The pandemic has created expanded opportunities to borrow against retirement funds, not to mention the use of cash in life insurance policies, home equity loans, and health savings accounts. Can borrowing be repaid? Your answer to this question is central to how much and from where you access cash.
Should you keep the marital home for the continuity and stability of the children? Can one of you guy the other out? Do you both want to retain ownership and share home equity at a future date? Should you refinance the house for a cash out of funds given that mortgage rates are historically low or to refinance in order to lower monthly costs? (Each question raises other questions that need to be addressed.)
Parenting Plan: Your parenting schedule may be very different during the Pandemic than the parenting plan that you would have devised if we were living in the pre-Covid world. Here you should think of an interim agreement and an arrangement when normalcy returns. Remember to be sure that you interim agreement includes provisions for how to handle current schooling options which look beyond time with the children, analyzing the impact of different schedules on each parent’s employment and sanity, not to mention on the children’s education and mental health.
Divorce Timing: Consider timing the divorce in order to achieve the most advantageous tax filing—advantageous being defined as the least total taxes for the family.
What if you file jointly?
What if you each file as head of household, assuming eligibility?
What about health insurance for both spouses?
We have attempted to raise questions for your considerations. We have not attempted to provide a comprehensive listing. Indeed, each questions brings up another question, complicating the analysis. However, the main point is to recognize that we are dealing with unprecedented circumstances and as such we need to be more expansive in our thinking. This is not to say that creation of an agreement will be more difficult; it is to say that it should incorporate a wider horizon. In the final analysis, couples will save breakdowns in their settlement and future conflict. Mediation provides a forum for the couple to look at the present, front and center, as they also look ahead to what we hope will be a brighter tomorrow.