Filed under: Consumer experience, Rich in America, Economic data, Personal finance, Housing
Sunday’s New York Times [registration required] cited examples of spouses that use a real estate windfall to finance a divorce.
One wife cited in the article used the profits from a co-op to finance a new life in California. The former high-ranking fashion executive sold her nine-room co-op in a prewar building — enabling her to realize her plan to divorce her husband, sell the apartment and thrive on her share of the profits. She now raves about the great weather and the distance between her ex-husband and her new condo in California.
University of Chicago economist Gary Becker won a Nobel Prize in 1992 by systematizing the logic of people like this former fashion executive. As far back as 1977 Becker showed that couples experiencing any unexpected, drastic rise or decline in net worth are at risk of divorce. Extrapolating from survey data, Becker concluded that “a greater deviation between actual and expected earnings increases the probability” of divorce.
This is not the only possible reaction to a marital windfall. Some take the extra money and invest it to strengthen a marriage — by adopting children or going to marriage counseling. Others find the real estate windfall so painful to divide with their spouse that they stay married. But many use the windfall to split and “trade up.”
What would you do if you had a real estate windfall?
Peter Cohan is President of Peter S. Cohan & Associates, a management consulting and venture capital firm. He also teaches management at Babson College and edits The Cohan Letter.
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