Unless you have been living under a rock for the past year, you know that things are getting more expensive. Prices have almost doubled on some items at the grocery store. Gas prices have gone up dramatically, although Florida boasts some of the lowest gas prices in the nation. Housing prices are astronomical.
The inflation rate is around 8.8%, almost double the 4.7% rate from last year. Reasons for this include the effects of the coronavirus pandemic, such as fiscal stimulus payments, supply shortages, and price gouging.
Inflation is affecting our everyday lives and even our marriages. Money problems are leading to divorce, but the irony is that these divorces are becoming more expensive due to money problems. Indeed, inflation is making it harder to resolve divorce cases. There is just not enough money to go around to support two households.
Inflation is causing problems in all areas of everyday life. Here is how it can affect your divorce.
Division of Marital Assets
Inflation is expected to be at 8.8% this year, which is the highest it has been since 1981. That is more than 40 years. So those who are divorcing today might be seeing the highest inflation rates in their lifetime. The same goes for divorce lawyers; they may have not dealt with divorce cases in this type of economic climate. So there is a lot that needs to be considered now.
In the past, many divorcing parties have requested to keep the marital home. This is especially true if there are kids involved. But nowadays, there is concern about whether or not this could be an option, and the main reason why is the mortgage. Many homeowners have an adjustable rate mortgage, which results in a flat-rate payment for a fixed period of time. After that, though, the payment could increase dramatically. In some cases, it could almost double. If a homeowner does not plan for it, then you can see how it would affect their ability to make payments in the future. The house could even go into foreclosure.
So, this can affect whether or not the homeowner can afford to keep the property. Even though they received the home in the divorce, it may not be in their best interest to keep paying the mortgage on the home. Many are better off selling their home and finding alternative housing that is much cheaper.
A similar issue is refinancing. Often, the person who keeps the marital home has lower earnings than the other spouse and the mortgage is in both parties’ names. Typically, the home has to be refinanced to get the other spouse’s name off it. But the problem with this is that the spouse who is keeping the home often has a lower income and cannot get a mortgage in their name alone. What happens nowadays is that the other spouse is asked to keep the mortgage as is. The home does not have to be refinanced while the spouse who is awarded the house can actually stay in the residence. This can, however, create problems for the other spouse if payments are not made in a timely manner, but there is an urgent need for this type of setup nowadays.
Inflation is also creating complications when it comes to alimony. While some forms of alimony may be short-term, alimony tends to last for many years. However, it needs to stay in line with the cost of living, and as you can see, that varies from year to year. It could be a lot higher next year or maybe it will be lower; you just never know.
That is why settlement agreements spell out various guidelines for payment. For example, it may clarify that if support is to be paid for a significant period of time, the amount will increase over time. In many cases, the rate of increase is tied to a specific consumer price index. This was easier to do years ago when inflation was minimal and stayed about the same year over year. But nowadays, there is no telling what that interest rate is going to be. We cannot predict that, and when the variance is high, negotiations become harder.
To deal with this, alimony agreements will often state that the increases must stay in line with the payor’s income. This means that if inflation rises by 8%, but the paying spouse’s income has only increased by 5%, then the alimony will increase by no more than 5%. In some cases, an agreement may have a flat rate as the increase. This will vary based on each divorce case. Of course, no two situations are the same.
The takeaway from these two common divorce complications is that you should try to get rid of any debts that have variable payments. Change mortgages, credit cards, and loans to fixed rates if you can. That will help keep your costs manageable and give you an advantage if you do decide to divorce in the near future.
Seek Legal Help
Money causes a lot of problems, and in today’s economy, it is making divorce cases harder to resolve. The cost of living is sky-high, and it is making it harder for lawyers to resolve certain divorce cases.
Broward County divorce attorney Scott J. Stadler can help you with your divorce case. We will help you meet your goals with our knowledge and compassion. Schedule a consultation by filling out the online form or calling (954) 398-5712.