COVID-19 Affect on Divorce Assets

a woman wearing a mask is holding a ring with both hands

The COVID-19 pandemic has had a deep impact on the U.S. economy, including on businesses and families in the Raleigh-Durham area.

For a couple that has begun divorce proceedings, sizable shifts in financial markets, real estate values, and employment status can have a significant impact on the valuation and equitable division of marital assets. This is particularly true if a couple is trying to fairly distribute real estate, a business, investments or other assets with fluctuating values.

If you are contemplating divorce, you must consider how obtaining an equitable distribution agreement will affect your home, retirement savings, business interests, antiques or collectibles, and tax liability. A divorce lawyer from Charles R. Ullman & Associates can walk you through the asset division process and explain how the financial turbulence linked to the pandemic may impact the valuations of your assets. When engaged as your divorce attorneys, we can develop a strategy that ensures your financial stability during and after your divorce.

Contact us at (919) 829-1006 to set up an initial consultation about your divorce, or schedule a meeting online today.

Asset Division in a North Carolina Divorce

When a North Carolina Family Court approves a separation agreement as part of divorce proceedings, the judge will seek to determine that the agreement spells out a fair plan for division of marital assets. This requires identifying all marital assets, attaching a value to each asset, and determining who gets what or what is sold with the proceeds split so that all marital assets are distributed equitably.

Equitable division of marital assets means a fair split, not necessarily an even division of assets. What is fair may take into account the different needs of one spouse, such as the custodial parent, or other factors, like the length of the marriage.

It is preferable for the divorcing couple to reach an agreement on a plan to divide assets and present it to the Court as part of their separation agreement. In a contentious divorce where agreement is not possible, the judge may ultimately decide asset by asset. A court order known as a Qualified Domestic Relations Order (QDRO) may be necessary to direct the distribution of certain assets.

The crux of a fair and equitable division of assets is the valuation of marital assets. In most cases, qualified appraisers are consulted. Marital assets should be appraised according to fair market value as of the date of separation. “Fair market value” can be defined as the amount at which property would change hands between a willing buyer and a willing seller and both having reasonable knowledge of the relevant facts.

When valuation is based on fair market value, timing and accuracy of the value assigned to a specific asset may be questioned, particularly if it is part of a tradeoff. For instance, if a couple is splitting a primary residence and a vacation home, fluctuations in real estate values might temporarily drive down the value of a suburban Raleigh home but not affect a house in an Outer Banks resort community.

The Court has the authority to value flexible assets at a later date if appropriate, such as when the value changes significantly due to circumstances outside of the owner’s control. The judge also has the authority to rule against expert testimony as to valuation, though ultimately the Court must make findings of fact, based on competent evidence.

How COVID May Affect Values of Certain Marital Assets

Let’s look at some of the more valuable assets for which the value is likely to have been affected by the coronavirus pandemic and some issues to consider.

Homes and other Real Property

In October 2020, the Federal Reserve Bank of St. Louis said, “the COVID-19 crisis significantly impacted the residential real estate market during the spring. Health concerns and stay-at-home orders led to fewer buyers looking for homes and fewer sellers willing to list their properties or allow strangers to enter their homes during a pandemic.”

While the housing market rebounded over the summer, the pandemic “generated an economic toll in the form of job losses and uncertainty.” In other words, many people remained in a financial position that precluded buying houses.

In many divorces, one spouse keeps the family residence and gives up other assets to balance the trade or buys out their former spouse’s ownership. A spouse retaining the family home could benefit from a lower valuation requiring him or her to pay less or give up less in trade to assume full ownership. To counter the potential loss, the other spouse might seek to set a future date for re-appraising the home and adjusting their buyout agreement.

Another option for a home and/or other real property is to sell it and, splitting the proceeds evenly, agree that each spouse will bear any effects of the economic downturn. In the Triangle, for example, low inventory and low-interest rates have helped keep home prices afloat during the pandemic.

Retirement and Investment Portfolios

The year 2020 was turbulent for financial markets. But 2021 saw a stronger market as COVID-19 vaccines are more widely distributed and many aspects of life return to normal.

The market’s continual fluctuation makes it important for divorcing couples to avoid liquidating investments during a down period, if possible. Losses realized by sale or withdrawal from retirement accounts cannot be recovered, even with reinvestment. There may also be accompanying tax liabilities and penalties.

If the couple splits shares in a stock evenly, the IRS allows each spouse to keep the original cost basis and holding period for the investment. That will have tax implications when the stock is sold.

Typically, a retirement account is either a traditional or Roth IRA. They differ in how they are taxed. In a traditional IRA, the investment is pre-tax money and withdrawals are taxed. Money put into a Roth IRA has been taxed, so proceeds from a Roth IRA are not taxable. Therefore, a Roth IRA with $100,000 in assets is worth more than a traditional IRA with $100,000.

A qualified domestic relations order (QDRO) will be necessary to split a workplace retirement plan, such as a 401(k) or a pension. Financial institutions generally require a copy of the divorce decree to split an IRA or health savings account (HSA), but agreement to split the funds would be part of the separation agreement and the divorce decree would make doing so a legal order.

Valuing Business Assets

While every business has felt the impact of the pandemic, some have benefitted. In particular, online retailers have done well as many consumers continue to avoid in-person shopping. Other businesses that could more easily convert to remote work suffered less of a productivity loss during the pandemic.

Over the course of 2020, federal and state governments offered financial programs to help struggling businesses, including the federal Paycheck Protection Program and the North Carolina COVID-19 Rapid Recovery Lending program. When evaluating a business, whether or not it took advantage of such programs must be considered. Having obtained a loan could reflect the actual strength of the business as well as its liability, in the case of repayable loans. Conversely, a spouse could argue that the decision not to seek governmental assistance has artificially reduced the value of what should be a thriving business.

For a divorcing couple that owns a business, the valuation of business assets is likely to be a complicating factor in separation and divorce. The aberration of 2020’s performance drastically affected the accuracy of revenue forecasts. Even a company’s or third-party auditor’s ability to reliably identify and quantify the multiple potential impacts of COVID may be questioned.

Contact An Experienced Divorce Attorney About Asset Division

At Charles R. Ullman & Associates, our experienced Raleigh divorce lawyer stays abreast of how issues unfolding in the world around us affect individual clients’ divorces. We can help you think through and plan for the financial impacts of separation and divorce, including the distribution of marital assets and business valuation.

Contact our firm today to discuss how the COVID-19 pandemic may affect your divorce and/or how we can keep your divorce from irreversibly damaging you financially. Phone (919) 829-1006 or schedule a consultation online.


Charles Ullman & Associates provides you respected, experienced and knowledgeable divorce and family law attorneys. You can trust us to help you through the legal process efficiently and effectively so you can transition to the next phase of your life. Our community involvement reaches beyond charitable support of important causes. We launched our own movement in Fraternities4Family and provide scholarships to able students in need.