One of the pleasures of writing this column is interaction with folks in the legal community. I hear with some frequency from an attorney in California. This morning he responded to my column about deferring mortgage refinancing because the costs were so great with words of encouragement about the idea coupled with words of caution about what potential negative consequences can arise.
He is exactly right. In law school we are trained from Day 1 to be risk averse. It’s why lawyers are not often very entrepreneurial. On the other hand, we live in a world full of risk as well as opportunity. The world has never been a place of stasis. Yet when a marriage falls apart clients tend to develop a kind of bunker mentality. After all, we are taught from childhood that marriage is supposed to be forever. That’s an old bromide in a world where half of marriages end in divorce but old perceptions are tough to conquer and people experiencing the trauma of a marital break-up are especially reticent to embrace divorce as a period of loss and opportunity.
Whatever you might think about the idea of staying on the mortgage of a marital home or making that home into a post divorce partnership to avoid 8.5% re-fi rates, realize that inaction can be as consequential as the most well devised decision tree. We have two cases pending where the publicly traded stock is trading at 20% of their date of separation highs for reasons not easily explained by the earnings reports of the companies involved. The market has simply gone cold while the parties fought over issues that today seem inconsequential.
Long ago we had a case where a middle-aged couple married in a setting where both earned substantial income. The marriage lasted only a couple years, but our client had taken his assets and made them all joint to demonstrate his commitment to the new relationship. When the marriage dissolved we argued that nonwithstanding the joint titling of assets, the brevity of the marriage warranted giving back to him almost all the pre-marital assets he had just recently made joint and marital. Admittedly, our contentions were encountering some judicial skepticism. But when the wife suffered an unexpected stroke with serious physical effects, the door through which we made our arguments was slammed shut. Where the concern was once putting two working professionals back into a status quo ante matrimonium the stroke instantly shifted concern for the financial stabilization of a person who might never resume employment.
In olden days, an employer in crisis might pink slip people employed on the factory floor. In the past decade, it has been the executive suite which has been the focus of the cleanout. The effect is devastating to either class of individual but today the job market for middle class workers is far more robust than for those higher up the job chain.
The point is that that the approach of “Let see how this plays out” can present great opportunity or great risk. Divorcing couples in Hawaii and California began the summer parrying over how to distribute the fast rising equity in their homes. Many today are oddly re-married in their efforts to prosecute insurance claims for the cinder that was once a happy home.
Divorce involves challenging and often painful choices. Make them and move on. There is risk in every important decision we make in life. Alas, as we note above, indecision also comes pregnant with risk. As the Chinese proverb reflects; where there is fear, there is also opportunity.