Liquidity: The Forgotten Factor In Divorce Settlement

One of the major duties of divorce attorneys is to divide up the marital assets. Tools like Easy Soft CIS software, dedicated NJ divorce software, make this job simpler by allowing attorneys to easily value and parcel out various holdings. However divorce settlement isn’t simply a numbers game. Attorneys need to be careful they aren’t working so hard to get the client a good deal that they end up with a bad deal!

Liquidity

You carefully fill out the Case Information Statement, list all assets and divide them out. Your client ends up with the house, the retirement fund and both cars. The spouse ends up with the couple’s joint savings account. The value of each settlement is equal so the deal is good, right? Actually no. Your client could be in trouble.

The problem is your client is asset rich but cash poor. You can’t buy groceries or pay the mortgage based on the value of illiquid assets. Maybe the client could sell the second car, but how long is that going to take?

Future Earnings

One common situation is that the custodial parent gets the house and depends on the alimony and child support to pay the mortgage and other expenses. What happens when those run out? If that parent isn’t making enough income to support those expenses then the house is going to have to be sold in a hurry, probably resulting in a serious loss of value. That’s not a good deal.

NJ matrimonial software like Easy Soft’s CIS simplifies the act of property division and support calculation but it doesn’t take the place of good financial planning. Work with your clients to help them understand the need for a balance of assets that gives them both long-term and short-term financial security. The house is a particularly difficult issue since it has both sentimental value and a practical purpose, but in many cases the best decision for all concerned is to sell the house so the custodial parent can downsize to a more affordable residence.

Use CIS to prepare multiple property division scenarios but don’t lose sight of the importance of liquidity. You don’t want to leave your client in a bad position but you also want to be aware of the deal being offered the spouse. If the spouse is the one who ends up illiquid, especially if the spouse is paying support, then the deal may end up in front of a judge later.