Family Law Attorney Jennifer Hargrave sat down with This Morning show host Gordon Deal to talk about the divorce in 2023 and the 3 Financial Obstacles people face when dealing with divorce. Listen below or read along with the conversation.
Gordon Deal
January is traditionally known as divorce month, but after a financially brutal 2022, many couples that want to call it quits are having a hard time with the math. Jennifer Hargrave, a family law attorney in Dallas has three main financial factors that will gum up a divorce. Jennifer, help us out.
Yeah, well we’re definitely seeing issues with regard to dividing the estate and the options that are available for people. So with the increase in interest rates and the housing market going down, where we are located, there’s still a vibrant housing market, but the uncertainty and the forecast about the future is definitely causing some concern. It can just make it a little bit more challenging for people to negotiate the deal that they want and we have to have a little more flexibility.
Gordon Deal
All right, so when it comes to something like selling the house here, obstacle number one, what do you say?
So a lot of times people will decide to go ahead and put the house on the market during or after a divorce and that’s fine. The challenge in that is going to be housing options. Once you sell the house, depending on the proceeds that are collected, of course rents are really high these days. Some couples are agreeing for maybe the partner who’s going to have the children most of the time to stay in the house, the marital residence. Where normally we would’ve seen refinance obligations being required within about six months from the date of divorce, people are agreeing to extend that for a longer time just to make it possible for the partner to stay in the house with the children.
But otherwise, I mean, the default is always to sell the property. If they can’t reach an agreement regarding other terms, then you just have to put the house on the market realizing that you may not get the best return at this time.
Gordon Deal
Wow. Right. We’re speaking with Jennifer Hargrave, family law attorney based in Dallas. We’ve identified three financial obstacles to getting divorced in this economy. The first one is selling the house. All right. Second one here that you point out, pensions and other investments. What about those?
Jennifer Hargrave
Yeah, so with the 401K accounts, we’re seeing lowered values where the account may have been worth significantly more a year ago. Even in spite of continued contributions, it’s just not at the peak. The option there is we divide it in kind so you can get those assets. If you’re the non-employee spouse, you’re going to be able to get your share of the assets without having to distribute the money. It’ll stay in an account in your name and you can just hold them if you want. Otherwise, people may be distributing those assets.
Jennifer Hargrave
It is important to know for people, there are provisions in the internal revenue code that can allow people to take a 401K distribution without paying a penalty. They of course, need to talk with their tax advisor and with their lawyer, but it is a way to free up some cash. So some people are… Where they would’ve taken a distribution, they would’ve sold the assets. They’re deciding to sit on them and hold them for a little longer and see if the market turns around.
But this isn’t the first time we’ve been in a downturn. In ’08, we had a big downturn and the market’s rebounded and there certainly is hope that they will rebound again, but it can just be a hard pill to swallow when your estate is worth maybe 25% less than it was a year ago.
Gordon Deal
Yeah. You said too, pensions are the most complex. How come?
Jennifer Hargrave
Pensions are complex because they’re very difficult to value. They’re guaranteeing a payout for a period of years based on the terms of the pension. We don’t know how long you’re going to live. We don’t know how long the other spouse is going to live. So most often what we do is we just divide the pension 50% or whatever the division is going to be that was earned during the marriage.
So it’s not complicated to divide provided you have all the plan information and you get an accurate order entered dividing that pension. But you want to make sure you do it at the time of divorce. A lot of times we find that the divorce attorney doesn’t get that special order entered for dividing the pension or the 401k at the time of divorce. Maybe people have run out of money, they don’t want to pay their lawyer anymore. But if you’re the client, you need to make sure that order gets entered because if it doesn’t get entered, that account’s not going to get divided.
Gordon Deal
Thank you, Jennifer. Jennifer Hargrave folks, family law attorney based in Dallas.
