Financial Crisis to Marital Crisis, No Money No Love

Financial Crisis to Marital Crisis, No Money No Love

Recession and divorce, it is said, go together like carriage and horse. Those who labor in Splitsville have several explanations for why that might be. There's the lawyer theory, that money provides the soft fatty tissue that insulates the marital skeleton; once it's cut back and people get a good look at the guts of their relationship, they want out. And there's the marriage-counselor theory, that couples who were never quite on the same page in the checkbook finally get pushed off the ledger by endless bickering over their dwindling resources. And the therapist theory, that financial worries cause stress, stress can cause depression, and depression is a total connubial buzz kill.


"Recessions tend to raise divorce rates," says Nobel laureate and University of Chicago Graduate School of Business economist Gary Becker. "But you won't see a pandemic." Census Bureau figures show that over the past 2 1/2 decades, recessions have had only minor effects on divorce rates, which have been slowly waning since the early '80s after 20 years of steadily rising. Those trajectories have been influenced more by the rise of the women's movement and women's earning power, lower fertility and changes in divorce laws than by dour Dows. The only recorded spike in divorces in the past 75 years came right after World War II.

But the trend lines could change, Becker says, depending on the depth of this recession, striking as it does squarely at people's homes. With the financial baggage that many matrimonial vessels are hauling, it's not yet clear whether more spouses will jump ship or start bailing. What is clear is that everybody involved--from the ultra-wealthy to the completely broke, from family-court judges to therapists--has to figure out a new way to navigate.

The Rich, Who Are Different

Steven Eisman helps dissolve the unions of mostly wealthy clients in Nassau County, N.Y. In the traditional thinking about the recession-led split, non--wage earners "who were willing to stay in a less-than-perfect relationship become less willing once the credit cards are taken away," he says. But recently some lawyers have noticed that as stock prices have plunged, they've gotten inquiries from business owners and investors looking to unhitch now, with the idea that being poorer on paper will work to their advantage when dividing assets.

"In most states, the value of a business is part of the matrimonial pot of money that has to be divided up. Often, assets are set at the time of separation," says Neil Stein, partner at Stein & Glazer in Philadelphia. "I've had several clients come to me recently and say, 'I've wanted to get divorced for years but didn't want to give up half of my business. Now that my business is not worth anything, wouldn't it be a good time to do it?'" Conversely, some nonearning spouses of the very wealthy are also trying to game the nuptial market, attempting to lock in a higher rate in case the economy travels further south.

Sumner Redstone filed for divorce on Oct. 17, when his more than 16 million Viacom shares were at $18.85, down from $39.40 six months ago; his CBS shares had dropped about $288 million in value in the same period. Redstone and his wife Paula reportedly have a prenuptial agreement, so it's unlikely the market has much to do with timing, but Mrs. Redstone divorces a poorer man than she would have six weeks ago.

The Stuck-at-Homes

Among the nonwealthy, the two assets that typically need to be divided are 401(k)s and the family residence. But suddenly 401(k)s aren't worth as much, and that home whose mortgage was the mother of all argument starters is not an asset at all. It can't be sold--or at least not for a price that provides money to start over.

Instead of working out who owns what, lawyers and mediators are trying to figure out the fiendishly trickier conundrum of who owes what. "We're negotiating debts--not assets," says Henry Gornbein, a family-law attorney in Oakland County, Mich. "Two, three years ago, I'd be telling you that houses had equity, and you'd either be doing a buying out or selling the house and splitting whatever the proceeds were. Now it's the reverse. You go into court; the judges just don't know what to do."

In the face of this, some couples are attempting to tough it out. "The divorce rate is down in Michigan," says Gornbein. "People have no choice sometimes now except to return to the marriage." Others are choosing to separate or divorce but live together until either the house sells or they go stark raving barmy and will sign anything. A Boston lawyer tells of a woman who had a restraining order against her husband but was forced by economic circumstance to let him move back in. (Eventually they reconciled.)

The ex-as-roommate phenomenon is common enough that Virginia already has case law that governs what couples who are separated but living under the same roof may and may not do if they want the separation to lead to a divorce. Sex is definitely out, as is doing each other's laundry, shopping or cooking for each other and going on a date. Virginia, clearly, is not for ex-lovers.