Recession and Divorce [2010-06-10]
IDFA 2010 Survey: Recession and DivorceThanks to all of you who responded to our request to complete a survey about the effects of the recession on your CDFA practice in this Spring! As promised, we’re going to share the results with you.
Of the 192 CDFAs who completed the survey, 69% said they had seen clients who could not afford to get divorced because of recession-related financial problems.
When asked to assess the difference that current economic conditions have made to the number of new divorcing clients coming through their doors, 39% say that the recession has not affected the number of cases, and 25% say that the recession has increased the number of new cases they’re seeing (these numbers compare with 43% and 19% respectively the previous year). Of those who had seen an increase, 75% experienced an increase between 1% and 25%, and 15% experienced an increase between 26% and 50%. The most common reason cited for the increase was the clients’ desire to reduce the cost of their divorce. Other common responses included:
Of the 38% who said the number of new divorcing clients coming through their doors has decreased, the most common reason cited for the decrease was fear: fear of the economy, job loss, losing (or not being able to sell) their homes, and of not being able to make ends meet without their spouses. Other common responses included:
In terms of the housing market, our survey respondents provided a ray of hope that we’ve reached bottom and may be on the way back up: 70% said the market has remained the same over or improved the last year, and only 30% said it has deteriorated.
However, the market is still pretty grim for divorcing homeowners: 22% percent of respondents told us that the number of clients whose matrimonial homes were “underwater” has increased dramatically over the last year. An additional 34% said that the number had increased slightly, and 24% said that the number had remained the same. Eighteen percent of respondents do not presently have clients with underwater houses, and only 2% report a decrease in the number from the same time last year.
Sixty-seven percent of respondents told us that the current housing market has forced them to come up with creative solutions to property-division problems when the matrimonial home fails to sell – or would sell for less than what clients still owe on the mortgage; this number is down from 73% the year before. The most common solution is for ex-spouses to retain joint ownership and continue to live in the house (often, he moves into the basement and she lives upstairs) until the market improves, agreeing to postpone final division of assets until after the house is sold. Other common solutions include:
Fifty-eight percent of respondents told us that the current economic climate has affected the type of assets their clients wish to receive as part of their divorce settlement (compared with 63% the year before). The most common request was for liquid assets only: their clients want cash rather than stocks, investments, real estate, or retirement plans. In other words, “Cash is King.” Other recession-related changes include:
According to the survey, Mediation and Collaborative Divorce proved to be the most cost-effective ways for clients to process the financial aspects of their divorce in 2009-2010. Many CDFAs work in two or more models, and they were able to paint a pretty clear picture of expenses incurred by their clients in each.
Of the 77% of respondents who use the Mediation process to help clients resolve their divorce issues, 44% reported that the average divorce cost less than $2,500; 38% cost between $2,500 and $5,000; and 18% cost more than $5,000 (15% cost between $5,000 and $10,000; 2% cost between $10,000 and $15,000; and 1% cost more than $15,000).
Of the 58% of respondents who use the Collaborative process, 42% reported that the average divorce cost less than $2,500; 37% cost between $2,500 and $5,000; and 21% cost more than $5,000 (19% cost between $5,000 and $10,000, and 2% cost between $10,000 and $15,000).
Copyright ® IDFA™ 2010
“These survey results are copyrighted and are used with permission from the Institute for Divorce Financial Analysts. www.InstituteDFA.com”