Getting divorced in 2020 was a bit different than it was in previous years due to COVID. Working from home, economic slowdowns, businesses being shut down, layoffs, virtual school, and childcare challenges were problems many of us encountered in what was a very difficult personal and financial year. Some of these same challenges continue in 2021 but businesses and families are trying to get back to normal or adapt to what has become the new normal. Should you take these challenges into consideration when considering a divorce in 2021? Should these challenges dissuade you from filing for a divorce in 2021?
Keep in mind that many of these economic and personal challenges are considered in all divorce proceedings. You simply need to be strategic in your approach to filing for divorce, including when you should file the case. In making the “when to file” decision, you should consider you and your spouse’s current financial circumstances as well as what you expect to happen in the next six to twelve months.
It is a common question during an initial appointment for a potential client to ask whether it is the right time to file now or whether he or she should attempt to negotiate a settlement with his or her spouse before filing. The follow-up question is often – What happens to money earned during this time period should the decision be to hold off on filing? Unless a prenuptial agreement was signed prior to the marriage, the answer is money earned during the marriage is marital property subject to division at divorce. Also, money earned even after a divorce case has been filed is treated as marital property that is subject to division. The clock stops on marital asset accumulation when the divorce is entered by the court. If you are seriously considering a divorce, then you should review your current financial wealth and consider what you may earn or accumulate in the coming twelve months.
An advantage of filing early in the year is that all your financial documents are readily available since you are receiving them in anticipation of filing your income tax returns. Documentation from the prior year — W-2s, 1099s, retirement account summaries, credit card summaries, etc. — is received during the months of January and February. You may also benefit from an early filing that provides you with the best opportunity to be divorced during that same calendar. This provides a clean financial break and allows you to file separate income tax returns.
An advantage of filing later in the year is that it provides you with time to see how you and your spouse’s income would project over the course of the entire year. The same is true if you or your spouse owns a closely held business as you can project gross sales and profit based on the year-to-date profit and loss statement. This later filing generally means that you and your spouse will file joint income tax returns as the divorce will not be final by December 31.
You may have other determining factors that affect when you should file. If you anticipate a big payout (i.e., a bonus payment) for work to be completed in the future or a business liquidation event in a year or more then you may want to file as soon as possible so the divorce can be completed prior to such events occurring. If you or your spouse own a business and you expect the value of the business to rise over the next year or two then it would make sense to file now as the valuation would be lower. Conversely, if you are experiencing unprecedented income from your business then it may make sense to hold off on filing to avoid an inflated valuation as more time would lead to leveling of your profit. Where are you and your family emotionally? If your family is already in a period of transition it may be best to file for divorce now as the transition was already occurring, and this additional change can be handled. Conversely, would adding a major life change like a divorce be an additional stressor on your family at this time? If so, then waiting to file may make sense.
As you can see, there is no perfect or simple answer to this question. When you are ready to pursue a divorce, make sure to talk with your lawyer about your filing concerns so a decision can be made as to what time is best to file.
Should you need the advice of a divorce attorney or have questions or concerns about your situation, know that we are here to help and discuss those issues with you.