A lot has been written about how the Covid pandemic put many marriages through a severe stress test. Couples faced job loss and financial instability. They juggled the needs of kids learning from home and spent more time in close quarters with each other. For marriages already on the brink, Covid may have been the last straw. What’s been less explored, however, is how the pandemic has affected the process of divorce itself.
From my perch as a Certified Divorce Financial Analyst (CDFA®), I’ve had a front-row seat to these changes, both good and bad. Here’s what divorce looks like now and what changes may stick around.
Change 1 – Massive Court Delays
During the height of the pandemic’s first wave, courts across the country closed and innumerable cases ground to a halt. Though the courts are now open, they face an unprecedented backlog of cases. Before the pandemic, it wasn’t uncommon for a judge to sign a divorce decree (the judgment that finalizes a divorce) in a week or two. These days, I’m seeing delays of 45 days or more until a decree is signed.
What Does It Mean?
Couples can’t move on financially until a judge signs their divorce decree. The decree is the green light that allows couples to formally begin dividing their assets. For example, if one spouse is set to receive funds from the other spouse’s retirement account, the retirement account administrator can’t move that money without the divorce decree.
What this means in the real world is that the spouse with less money and fewer assets could find themselves in deep financial trouble while they wait for the divorce decree. The bills won’t stop coming just because the courts are backed up!
What to Do About It?
The best way to address this challenge is to plan for it. That means assuming that assets may be trapped in limbo for up to two months. Personally, I’ve been advising my clients to make sure they have access to plenty of cash not only at the beginning of the divorce process but also while waiting for the decree to be signed. Even if they expect to get a lot from their settlement, that money and those assets may not arrive for a while. In the meantime, they’ll need enough money to pay the bills, cover emergencies, and live their life.
Is This Permanent?
Thankfully, this backlog should eventually work itself out, assuming the courts don’t close again. The real question is how long it will take for everything to get back to normal. This is impossible to know, which means couples need to be conservative in their planning. It’s always better to have access to more cash than you end up needing rather than not enough!
Change 2 – The Growing Use of Technology in Divorce
Probably one of the most exciting developments over the past year and a half is the growing use and comfort with technology in the divorce space. Applications like Zoom, Dropbox, and DocuSign all existed before Covid-19, but the pandemic forced companies and individuals to adopt them like never before. Suddenly, it became common to hold legal conferences, client evaluations, and even court hearings over Zoom instead of in person. Instead of law offices printing out mountains of documentation, they now just put everything into a Dropbox folder and share a link.
What This Means
Personally, I believe the embrace of technology has been good for the divorce industry on a number of levels. First, it has saved clients significant money. Before the pandemic, lawyers billed clients for the time it took them to drive to the court and wait for their case to be called. Lawyers also were much more likely to print out physical documents, which added cost and time to the case, especially if they paid to have those documents delivered to opposing counsel.
I’ve noticed a lot of changes in my own practice. Using Zoom to meet with clients has led to fewer clients arriving late for their appointments or missing their appointments altogether. As a result, I’ve been able to see more clients in the same amount of time. Using DocuSign and file-sharing services, like Dropbox, has also made life much more convenient. Instead of clients mailing documents to my office or bringing them in person, now they can just drop them in a shared online folder from their home computer, and I’ll see them immediately. DocuSign also speeds up processing time and can save clients unnecessary trips to my office.
Finally, the use of Zoom and other video conferencing software has extended the reach of my practice. Now, I can work with anyone in Texas rather than just those who live in the greater Austin area. Video conferencing software also gives individuals more choices when it comes to picking the right specialists for their divorce.
Is This Permanent?
Courts are already shifting back to hearing cases in person. However, I hope that some of these changes will stick around. Now that clients and divorce professionals are more comfortable using software programs, I think these are here to stay. Personally, I intend to continue offering Zoom meetings and encouraging clients to use file-sharing programs and online document signing apps.
Change 3 – Making Financial Estimations Is More Challenging
A big part of my job as a CDFA is using data to make financial predictions so I can give my clients the best advice possible. For example, in determining how much spousal support a client should ask for, I need to know their yearly lifestyle cost.
The coronavirus has not only dramatically changed the way people spend money, but it’s also creating numerous supply chain disruptions which are changing how much things cost and fueling rising inflation.
What It Means
Shaky or incomplete data makes it more challenging for me to create accurate predictions. Let’s look at one example. I have a client who is getting divorced, and I need to help her determine if the assets she’s receiving will be enough to ensure she can retire on time. One of the first things I need to do is determine her yearly spending.
To do this, I typically look at her spending over the previous year. However, the year 2020 was a major anomaly. Maybe my client usually takes three vacations a year but didn’t travel at all in 2020. Maybe she likes to go out to dinner every week but hardly went out at all. Money that might have been spent on conferences, concerts, sports events, and even hair salons often stayed in savings accounts in 2020.
Next, I need to predict how expensive things will be in the future to see how far my client’s money will go. What if she expects to purchase a new car every five years? Well, at the moment, the world is facing a huge chip shortage, which is affecting automakers. New car prices have risen 5% in a year and used cars have shot up 30% (CNN). We’re also seeing big increases in the cost of homes and many other goods.
Such uncertainty makes it much more difficult for me to predict how far my client’s dollars will go over the next decades and what her finances will look like when she’s ready to retire.
What to Do About It?
In determining the financial needs of my client, the solution is to skip over 2020 and look further back to understand her spending patterns in a normal year. However, the farther I go back in time, the less accurate the data becomes. What my client spent money on in 2018 and 2019 may not reflect her post-pandemic spending.
As for estimating future costs, this one is even trickier. The best solution here is to be more conservative to account for higher variability. In other words, that means that I would recommend that my client save more in case inflation keeps going up.
Is It Permanent?
It’s hard to tell if spending patterns will ever go back to the way they were before the pandemic. Many of the industries hit hard during the pandemic, like restaurants, gyms, airlines, and salons will come back. I also believe those who weren’t financially harmed during the pandemic will be eager to eat out, see movies, and attend concerts. But, perhaps a year at inside helped people recognize the benefits of making dinner from scratch or watching movies at home instead of in the theaters. It might be a while until we reach anything resembling “normalcy,” especially as we continue dealing with different pandemic variants.
As for pricing uncertainty, some of the supply chain disruptions will work themselves out. However, the government has also been pouring a lot of extra money into the economy in the form of stimulus and rescue packages. Combined with historically low interest rates, these moves are putting significant inflationary pressure on the economy. We could be in for a rocky ride! This is just another reason to be conservative when planning for the future.
Is Now the Time to Get Divorced?
I don’t believe in trying to “time” divorce for the right market conditions. There will always be challenges to face no matter when a divorce happens. The best time to get divorced is when you feel sure that divorce is the right decision for you. That being said, however, it is important to understand what the divorce landscape looks like and what to expect as we move into a post-pandemic world.
Melanie Johnson is a Certified Divorce Financial Analyst (CDFA™) and serves as the National Director of Second Saturday Divorce Workshops. Since 2006, Melanie has continuously led a Second Saturday Divorce Workshop in her home city of Austin. Melanie also works as an investment advisor for Beck Capital Management, LLC.
Attending a Second Saturday Divorce Workshop can help with that. Even workshops weren’t immune from the pandemic. Over the past year, many Second Saturday Divorce Workshops went online. Some are still online, while others are offering a hybrid model, where attendees can choose to attend online or in person. My own Second Saturday Divorce Workshop in Austin is back in person. If attending the workshop is the right next step for you, I hope to see you there!