We’ve been living with the coronavirus for some time. By now, the virus has exerted a degree of control on virtually every facet of our lives: work, school, play, shopping, socializing, to name a few. Likewise, our ability to observe and participate in life cycle events such as births, graduations, weddings, and deaths has been altered immensely by the limitations placed on us by the virus. The toll of the virus on families has been widespread and varied. The process of getting divorced has not escaped the hold of the coronavirus. With courts operating on a limited basis for the last few months and into the foreseeable future, divorce cases that were pending in court have slowed to a crawl. Efforts to settle cases outside of court continue, but may be less efficient because of the challenges of in-person meetings, which often help break log jams that had seemed intractable. And while mediations may be done via phone or video, traditional mediation models typically rely on personal connections achieved in face-to-face conversations.
While the coronavirus has created challenges to the divorce process, it does not prevent moving forward with a divorce during the pandemic. Still, it is important to recognize that the virus is sure to leave an indelible imprint on the outcomes that may be reached in a divorce in almost every way possible. In a typical divorce (in truth, no one divorce case is “typical”), there are standard matters that need to be resolved. They include custody, child support, spousal support, and property. Each of them is potentially impacted by the effects of the virus on our families, businesses, jobs, and investments. The failure to recognize those effects may lead to outcomes that are unsatisfactory or that leave shortcomings which will need to be addressed long after the divorce is final.
The virus has complicated how parents maintain custody arrangements that have already been established. There are several underlying conditions that may create stresses where children are concerned. They include situations where: (1) a parent or child has health issues that make them particularly susceptible to contracting the virus; (2) a parent takes risks, necessary or unnecessary, that increase their chance of exposure to the virus; and (3) children continue to participate in group activities or extended family gatherings. Conflict over custody is difficult in normal times. During a pandemic, that conflict is exacerbated by the disruption of routines, heightened emotions, and fear of the unknown. Anticipating how the virus might impact custody arrangements and addressing them in a settlement will reduce future conflict over custody issues. For instance, if a parent’s employment puts them at risk of being exposed to the virus, a commitment from that parent to be tested regularly for the virus and to routinely sanitize their home might be appropriate. Where a parent is expected to travel internationally with children, such as to see overseas relatives, it may be reasonable to include a provision that precludes such travel in the event the Centers for Disease Control and Prevention has issued a notice to avoid nonessential travel.
Given that income is one of the more significant factors driving the establishment of child support and alimony, the effect of the pandemic on parents’ incomes cannot be ignored. Unemployment claims are at historic levels. How is child support set when one or both parents is out of work? Is the loss of a job temporary or permanent? Even those who have been lucky enough to continue working through the pandemic may have experienced a decline in income due to the effects of the virus on the business where they work, or even their own business. Everyone expects things to return to normal (maybe a new normal) once the pandemic subsides. But, how do we resolve support issues in the meantime without delaying the divorce indefinitely? Fortunately, matters of support can be addressed temporarily in order to conclude a divorce with the understanding that support can be revisited as necessary after the divorce once parents’ incomes normalize. Both child support and alimony are modifiable after a divorce is finalized. If the parties are not able to agree on a modification of child support or alimony after the divorce is final, the court will have the ongoing authority to take up the issue. Alimony in particular may be “reserved” at the time of a divorce, meaning that the court has the ability to address alimony post-divorce without deciding the alimony issue at the time of the divorce.
Anyone with investments or a retirement plan knows the havoc wrecked on those assets by the pandemic. At its lowest point since the pandemic took off, the stock market was down about 32%. While financial analysts anticipate that the market will someday recover, when settling divorce cases now, we have to accept that the value of investment accounts and retirement accounts are uncharacteristically low compared to those values at the start of the pandemic. A similar decline in account values occurred during the 2008 financial crisis, yet people got divorced then and with appropriate planning and support, were able to weather that storm.
In resolving matters of property in a divorce, and when fashioning an equitable distribution of marital assets, we are expected to account for the value of assets at the time of divorce. While one could wait to finalize a divorce once property values have rebounded, that may not be desirable or practical. Even then, the value of certain assets may have been permanently impacted by the economic consequences of the pandemic. For example, a successful business (such as a restaurant) that had marketable value before closing due to the pandemic, may be virtually worthless now. On the other hand, a business that manufactures shipping boxes for Amazon may be worth more now than ever. These distortions will complicate how businesses are valued in a divorce setting. When placing a value on an ongoing business, a business valuation expert typically employs a methodology that relies on revenue and expense data over several years to see trends and account for swings in profitability. A business that was impacted by the coronavirus—and most businesses were—may operate and look much different in the post-corona marketplace. The price a buyer will pay for a business today will necessarily depend on the future success of the business. Predicting that success presents a novel problem for valuation experts in a business environment that has been reshaped by the coronavirus. In these cases, engaging the services of an experienced business valuation consultant is crucial.
Those who are in the midst of a divorce or contemplating a divorce should proceed carefully and consider the ongoing impact the coronavirus will have on their lives. How well that is accomplished will directly impact the long-term success of the outcome in the divorce. The process takes foresight that is gained from experience. Choose advisors who can provide perspective and who understand the unique challenges presented by the coronavirus. With the right help, those experiencing divorce now can expect good outcomes despite these challenges. The Family Law team at Wright, Constable & Skeen is prepared to help you work through a divorce in this unique environment.
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