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For Richer or For Poorer: Divorce and the Recession
The divorce rate is now at its lowest point since the 1970s. A variety of factors related to the economic downturn may be responsible.
December 10, 2010 /Money PR News/ -- The divorce rate has fallen to its lowest point since the early 1970s, according to data from the Centers for Disease Control and Prevention (CDC). Since the divorce rate seemed to be on an upward trend into 2007, many are attributing the decrease in divorces in 2008 and 2009 to the economic downturn.
A variety of factors relating to difficult economic times, such as the housing market and high unemployment, may be impacting both the divorce rate and other decisions people are making regarding relationships and finances.
Sluggish Housing Market
Previously, many families' most valuable asset was their home. The depreciated housing market makes it challenging to sell homes for a profit and less attractive for either partner to take over the mortgage. Couples often used to fight over who was able to keep the home since it provided equity and stability. Now neither spouse may want to hold onto a home that is "upside down," or valued lower than the existing mortgage.
Several options are available for couples wanting to divorce but feeling saddled by an underwater mortgage:
- A couple could maintain joint ownership of the home and defer selling for several years until the market (hopefully) rebounds.
- One spouse could continue to live in the home.
- Both could move out and the property could be rented.
Another option is a short sale where a couple sells the home at a loss and negotiates with the lender about how the debt will be allocated. Under some circumstances a lender may be willing to take a majority of the loss. The downside of a short sale is that it usually hurts the couple's credit score.
Difficult Employment Outlook
The tough job market has definitely affected many couples. For those considering separating it can be more challenging when there is suddenly a loss of an income.
Men in the workforce have especially been impacted by the recession. According to the U.S. Bureau of Labor Statistics, 75 percent of those that have lost jobs since 2007 have been men. Difficult economic times may cause families to pull together, or cause marital strain to increase as resources become more strained and roles may shift.
Given the difficult employment market, now may actually be a good time for the main breadwinner to file for divorce. The diminished resources of wage earners who have been laid off or taken a pay cut may be taken into account when arriving at a settlement. This could result in them being able to achieve more favorable terms than they would have previously.
Prenuptial Agreements on the Rise
Although divorces have been decreasing prenuptial agreements are becoming more popular. According to the American Academy of Matrimonial Lawyers (AAML) over 70 percent of divorce attorneys have seen an increase in prenuptial agreements during the past five years.
It may be that since many have seen losses in their financial portfolios, what remains becomes more important. Couples are using prenuptial agreements to protect their assets as well as to keep their individual debts separate.
AAML also found that there has been a 36 percent increase in retirement or pension benefits being included in premarital agreements. It seems likely that people who have lost a significant portion of their retirement funds in the downturn do not want to risk losing any additional money in a divorce.
Premarital agreements are also increasingly being requested by middle-class couples and women. According to AAML, nationwide 52 percent of family law attorneys found an increase in women initiating premarital agreements. According to the U.S. Bureau of Labor Statistics, for the first time women make up a majority of the workforce in well paid professional and managerial positions. Since more women are working and making higher salaries it makes sense that they are increasingly concerned about protecting their assets.
Cohabitation Increasing
Divorce may also be declining because more couples are not marrying in the first place. According to a recent Census report, the number of 25- to 34-year-olds that had never married jumped from 34.5 percent in 2000 to 46.3 percent in 2009. It could be that couples are worried about the costs of a wedding and establishing a home during an unstable economic period. Additionally, same-sex couples continue to be prohibited from marrying in most states.
Whether choosing to rent or buy more unmarried couples are opting to live together. The Census reports that the amount of unmarried couples who resided together increased 13 percent over the past year alone. This has led to the growing popularity of cohabitation agreements and domestic partnership agreements . These agreements often operate similarly to a prenuptial agreement and can address a variety of issues including sharing title to property and estate planning.
If you are considering a divorce, prenuptial agreement or domestic partnership agreement you should consult an experienced family law attorney. A lawyer can provide valuable advice about your legal rights and options.
Article provided by Colwell, Ferrentino & Petroccione
Visit us at www.colwell-law.com
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