How Inflation Impacts Divorce

How Inflation Impacts Divorce

Inflation refers to the general rise in prices of services and goods in the economy and the subsequent reduction of purchasing power over time. Inflation is primarily caused by demand-pull inflation, cost-push inflation, and built-in inflation. Inflation rates in 2022 are the result of the COVID-19 pandemic, the war in Ukraine, and the strong labor market.

With gas and food prices as well as property prices and mortgage rates at a high, you may be worried about how the current market and inflation affect your divorce case. In this article, we will discuss the ways in which inflation might (or might not) affect your divorce.

Does Inflation Affect the Divorce Rates?

Because of inflation and/or world events, some clients consider delaying their divorce. With so much uncertainty and the changing landscape, many people want to avoid adding even more change to their lives. The loss of a partner (because of divorce) can seem daunting as it may be too much change financially and socially for some people.

While we do not have current data about divorce rates and inflation, historically, we know that recessions and economic issues impact divorce rates. During the Great Depression, divorce rates decreased by 25%; then, in the late 1930s and 1940s, divorce rates rose again. According to data from the National Library of Medicine, during the recession of 2008-2011, the divorce rate also declined, and about 4% of the projected amount of divorces did not occur.

Inflation & Property Division

Tangible assets will have a higher value because of inflation. If you’ve been paying attention to the housing market, you know that house prices have been o the rise since March 2021 nationwide, and many experts do not believe the prices will be falling anytime soon. In addition to your home, other assets may be worth more than you believe. You should have all of your assets appraised before you negotiate the terms of your property division agreement to ensure you have an accurate idea of your marital wealth.

Does Alimony Go Up with Inflation?

In Georgia, a spouse can be awarded temporary or permanent alimony. While temporary alimony is meant to provide financial support for either party while the divorce is ongoing, permanent alimony is meant to provide support even after a divorce is finalized. However, it is important to note that permanent alimony is not always awarded for an unlimited amount of time. In making a determination concerning alimony awards, the court considers:

  • A couple’s marital standard of living
  • Both parties’ financial resources
  • Each party’s contributions to the marriage (including career-building, educational support, childcare, etc.)
  • Each party’s separate assets
  • The length of the marriage
  • Whether the spouse in need of support can acquire training to find gainful employment
  • Any other factors deemed relevant

Inflation may or may not be considered relevant or equitable to the court. However, that is at the judge’s discretion.

If you have already gotten divorced, you may wonder whether you can modify your alimony agreement because of inflation. In Georgia, you must prove that either party has experienced a substantial financial status change, and you can only apply for modification every two years. The question is whether inflation is considered a substantial change in circumstance, which is a decrease or increase in the payee’s ability to pay and/or an increase or decrease in the supported party’s needs.

Inflation & Cost-of-Living Adjustments

If you will receive child support or alimony, you may consider adding a Cost-of-Living Adjustment (COLA) provision in your divorce decree; this clause allows for alimony and/or child support payments to be modified annually based on the cost of living. However, it is important to note that while payments can increase as prices rise, they can also decrease if we experience an economic decline. You should consult with an attorney to better understand whether this clause is the best option for you.

Inflation & Increased Expenses

While inflation may benefit you if you and your soon-to-be-ex-partner sell an asset, you may be negatively affected by the increase in prices. To prepare for your divorce as well as post-divorce life, you should craft a budget for your post-life divorce so that you can understand the current market prices as it relates to your individual finances.

Consult with Our Experienced Attorneys

At Balbo & Gregg, Attorneys at Law, PC, we have over 40 years of collective experience, and we have helped countless families and individuals navigate the divorce process. If you are concerned about how the current market and climate may affect your divorce, our attorneys can advise you and help you make informed decisions concerning the terms of your divorce settlement. We handle contested and uncontested divorces as well as military divorces.

Schedule a case consultation today by calling (866) 580-3089 or reaching out to us online today.