Economic uncertainty continues to affect investors across the U.S. and globally. Market watchers are closely monitoring economic indicators, such as rising interest rates, fluctuating employment figures, and mixed signals in housing and GDP growth, all of which are influencing financial decisions for individuals going through divorce, particularly those with significant investments, equity-based compensation, or real estate holdings, these shifting conditions can significantly impact the structure and value of their divorce settlements.
At Mansur Law Group, we understand how critical it is to align your divorce strategy with the current financial climate. Below are several key areas where inflation and market volatility are playing a larger role in the divorce process.
Real Estate and the Family Home
Unlike many regions in the U.S., home prices in Massachusetts continue to climb. While this may result in greater home equity to divide, it can also present challenges for divorcing spouses who need to secure new housing. High interest rates have made mortgage borrowing more expensive, impacting affordability and purchase options.
However, some lenders are offering mortgage assumption options, allowing one spouse to retain the existing loan terms as a means of removing your spouse’s obligation under the existing mortgage rather than refinancing at a much higher rate. It’s critical to evaluate these options carefully with your divorce attorney.
Investments and Market-Linked Assets
When dividing investment portfolios, flexibility is key. Political and economic shifts can rapidly alter asset values, sometimes between the time an agreement is drafted and finalized. Whether you’re holding individual stocks, funds, or brokerage accounts, it’s essential to account for timing, tax implications, and potential market gains or losses.
Your attorney should conduct a thorough review of all investment holdings, considering both short- and long-term implications, and be prepared to revisit settlement terms if significant market movement occurs.
Equity-Based Compensation
Many executives and professionals receive part of their compensation through equity, such as Restricted Stock Units (RSUs), stock options, or performance-based awards. These assets can be particularly complex in divorce. Generally, the vested equity is divisible during the divorce, but it is important to consider whether or not those assets are transferrable or if they will need to be sold in order to provide your spouse with their share of the asset, which will create a taxable event that needs to be considered in the overall division of the assets so that the spouse holding the equity does not get left with a huge tax bill.
Retirement Accounts and Pensions
The value of retirement assets—401(k)s, IRAs, and pensions—can be heavily influenced by market performance. Inflation must also be factored into future projections. In addition, withdrawals and tax consequences require careful planning.
When negotiating division of retirement assets, ensure that Qualified Domestic Relations Orders (QDROs) are properly drafted, and that the impact of inflation and tax treatment is fully understood before reaching a final agreement.
Employment and Income Stability
In both litigated and mediated divorces, the stability and outlook of each spouse’s employment can significantly impact support determinations. Massachusetts courts may take future income potential into account when deciding alimony. If you work in an industry subject to market-driven cuts or layoffs, this may influence both support obligations and long-term planning.
Even outside the courtroom, parties should carefully consider how to create a settlement that promotes financial security for both spouses amid a shifting economic landscape.
Working with the Right Legal Partner
Economic volatility adds complexity to divorce, but with the right legal strategy, it can also create opportunities for smarter financial decisions. At Mansur Law Group, we specialize in high-asset and complex divorces and are adept at navigating the intersection of family law and financial markets. Whether you’re pursuing litigation or mediation, we provide comprehensive financial analysis and strategic planning tailored to your unique circumstances.
If you’re preparing for divorce and want to ensure your financial future is protected in a changing economy, contact our team today for a consultation.