Timing a divorce

If you are thinking of getting a divorce, you may want to consider the important question of WHEN. That is because in this economic downturn, the timing of your divorce could determine the settlement you get. This is especially true in high net worth divorces and high profile couples. Couples who are in the lower middle class or working class tax brackets probably have less to worry about in terms of year end bonuses, stock portfolios, business valuations and other lifestyle issues that affect those in higher tax brackets. That is not to suggest that lower income individuals should not think about the timing of their divorces. In this kind of economy, everybody needs to think about it. However it is the high earning/high net worth couples who have the most to lose or gain, depending on when they file.

If you are in a high profile marriage and there is significant assets (or there used to be before the blood bath on Wall Street) and you are the spouse who is the earner, you might want to think about filing the divorce after the year end bonus kicks in. That way, the court will have access to your 2008 taxes (or projected taxes) and networth statement which will show a significant dip from, say, last year’s taxes and earnings. This is the number that would be used in valuating how much you would have to pay in spousal support and child support.

But if you are the spouse who is not the earner, it might be a smarter move to file now, so that the networth statement does not show the dip in income and earnings on your spouse. Although, to be realistic, if you file now, in November, by the time networth statements are due, it will be January. And the issue of year end bonuses is beside the point.

So the issue may come down to not so much filing before the end of the year or after the end of the year, but rather, filing when the economy picks up or before the economy picks up – depending which side of the litigation you are likely to be on. i.e. earner spouse vs. non-earner spouse.

Check out this article in today’s New York Times