Should I Divorce in a Recession?

We live in uncertain times with increases in interest rates impacting homeowners, unprecedented energy bills and rising inflation across all goods and services in the UK.

At the same time, for some people, these pressures are exposing cracks in their relationships and they may be contemplating separation but worried about the financial repercussions of doing so.

Following the 2008 economic downturn, a study from relationship counselling charity, Relate, found that couples worst affected by the recession were eight times more likely to suffer relationship breakdown. As family budgets are under increasing pressure, it may not feel like the right time to consider such a change.

Divorce during periods of economic downturn requires a different approach but is entirely possible. It requires closer inspection of the family finances, creative solutions and a clear strategy re the key objectives and priorities.

Impact of the wider economy

There may even be benefits to separating during times of economic difficulty. A reduced income for the higher earner may result in lower maintenance payable to their spouse. On the flip side, the lower earner could argue that they require higher maintenance to support an increased cost of living.

A weaker stock market will impact the value of pensions and investments. These factors could mean that the overall value of a marital pot decreases but the impact of this can be mitigated by ensuring that both parties share any reductions in value equally. The intention, in any division of assets, is to ensure that risk is distributed equally so that both spouses share a mix of the more stable and more risky assets.

It may be that we see a drop in house prices. This could mean that buying out your spouse’s share in the family home becomes a viable option as opposed to putting it on the market for sale.

Businesses may suffer and their valuations could differ drastically from before the recession. This may require specialist advice to determine to what extent the blip is temporary and the nature of the business’ bounce-back ability.

Couples who have already divorced may be able to pursue a variation of child and / or spousal maintenance to reflect their change in circumstances.

In an ideal world, the preference is to seek a ‘clean break’ i.e. the parties are able to move forward with their lives financially independent of each other. In times of economic uncertainty, it may not be possible to capitalise maintenance and it may be necessary to consider a series of smaller lump sum payments over a period of time rather than one large lump sum facilitating a clean break from each other.

How we can help

Irrespective of whether you are ready to push the button on a divorce or not, it is always advisable to seek legal advice early on if you are contemplating separation so that you can better understand your rights and be armed with information tailored to your circumstances enabling you to make an informed decision about your future.