"Just in case" -- Financially planning for a divorce

Ducktale · December 2013

I posted about not having my own IRA, and I'll probably open one up, but it's got me thinking. When you make financial decisions (or really, any decisions), do you take into consideration the possibility of a divorce down the road? I'll admit I don't (hence not having my own IRA). I am sure this is incredibly naive and practically unwise, but I just have a hard time "planning" for this, because I really try to live my marriage with the "divorce is not an option" mindset, so I don't entertain the thought that as a possibility, and we make our life plans and financial decisions planning on always being married. (need to add the disclaimer that in the case of abuse or something like that, divorce would of course become an option)

If you do consider a possible divorce in making decisions, do you discuss that with your SO?

Erikan73 · December 2013

I don't consider divorce in any decision making, like you I'm not planning for that (but who really does). I look at what is going to be most financially beneficial to us. My husband and I don't have any joint financial investments at this time. I had an IRA started years before I met him and I have my 401K. He has his 401K. I think it's good to have multiple sources of investments so that way if one investment takes a dump, hopefully the other investments you have will cover it. The other plus to having something in each of your individual names is that should one of you pass, if the joint accounts get put on hold for some reason, you still have access to the accounts in your individual name.

Xstatic3333 · December 2013

I don't take the option of divorce into account, either. Now, before we were married I took the option of the marriage falling through into account, and we held off on combining things. But now? Not at all. I do want to get a Roth IRA going for H, but just to have more in tax-advantaged accounts (we'll be able to max mine out starting next year). He'll probably want his in very conservative investments than mine, which will diversify us more (always a good thing!). I don't consider this naive, just part of fully committing to my marriage. No judgement on anyone who has taken a different approach, this just works for us.

YellowTulips521 · December 2013

I do not take divorce into consideration at all either. I do have a mutual fund that was started when I was born, so I would have something to fall back on, but I can't even force myself to think about the possibility of getting divorced. I know it happens, even to people who you least expect, but I prefer to avoid the topic myself.

vlagrl29 · December 2013

I don't consider divorce and option either but I had been married before I met DH and a lot of crap happened that made me re-think things. Before I married DH I wanted a pre-nup and he agreed to it. He also had one on himself too. I had inherited some things when my first H passed away and I wanted them protected just in case. It kinda sucked preparing for a marriage and a possible divorce at the same time. It did cause some arguments, but we got thru it. It doesn't affect our money decisions at this time. One thing I don't know if I can ever do is add his name on my (our) home. I need to add him as beneficiary in case I died. we've been married 4 years now and I thought that maybe by now I would have added him as owner with me...maybe one day.

Mom987 · December 2013

I've never thought "what if" about divorce when it comes to finances. Your post actually made me realize that DH should open one if we can both be contributing (only I have the Roth IRA now).

brij2006 · December 2013

We're like you 2 and do not plan for that "what if" in that regard.

Now that you have me thinking about it though, we've increased H's 401k by a lot because his employer offers and matches, mine does not. So I just have my small Roth that's solely under my name. The house is also solely in his name because he bought it before we got married, and we've been dumping our extra money toward his SL's only because they're at a higher interest rate than mine. So he would make out like a bandit at this point.

Guess if I really think about it, I'm going to need a damn good lawyer if we ever get divorced. But we're also in the "divorce isn't an option" boat. So I trust that we make these financial decisions as a couple and do what benefits us as a whole. Not what's in whose name, and how to make it equal.

Ducktale · December 2013

These are interesting answers, I guess I thought more people probably covered themselves better than I do. I'm interested to hear if there are any previously divorced people here that have thoughts.

We've always planned on me being a SAHM when we have kids, so that worries me a bit in the event of a divorce, just with such a gap in employment, no health insurance, etc.

maple2 · December 2013

Although neither DH nor I have any intention of getting a divorce, we do make some financial decisions (like having IRAs in both of our names) to make sure we would both be taken care of if for some reason our circumstances changed. With IRAs in particular, it just seems so easy to set up 2 accounts and, at least for us, not very controversial.

When it comes to other things, though, like me taking time off to care for our kids, the thought of divorce did not factor in. I did worry about my future earning potential and employment prospects, but that was a general worry not specific to the possibility of divorce.

I think I am older than a lot of people on this board, so I have known close friends who have gone through messy divorces. DH's parents divorce just a few years ago. We have both seen it happen enough and we both care about each other enough to want to make sure we would both be financially okay if that happened.

vlagrl29 · December 2013

Ducktale said:

These are interesting answers, I guess I thought more people probably covered themselves better than I do. I'm interested to hear if there are any previously divorced people here that have thoughts.

We've always planned on me being a SAHM when we have kids, so that worries me a bit in the event of a divorce, just with such a gap in employment, no health insurance, etc.

we were going thru the divorce process when he passed away. One of the reason's I can't yet put DH's name on the house is because I think "what if there was a divorce?" This way I know I will always have a home.

WendyGR · December 2013

It never even crossed my mind, even though I was divorced. DH and I both have our own jobs and 401k/403b. We came into the marriage with the same amount of debt though and make about the same amount of money so everything is in both of our names.

hoffse · December 2013

I don't take it into account for me. That said, I DO take it into account for clients. For instance, I won't speak to a client about an inheritance if I know that client's spouse is on the phone and listening in. But that's to cover my own butt professionally.

H and I talk about money so much that if things started to go south it would really be a race to the accounts. We both know what we have, and we both have access to everything so that actually encourages good behavior - neither of us could do something shady from a financial perspective without the other finding out almost immediately.

I also believe that divorce is one of those things that depends largely on how it is perceived in your social group. My parents are not divorced. H's parents are not divorced. The vast majority of our family members and friends are not divorced. In fact, at our wedding we had 3 people out of 170 who had ever been divorced. It's just not done in my social group unless circumstances are truly awful (ie: abuse, spousal theft, affairs, etc.). In other words, it hasn't been normalized for H and I, so we don't even think of it as a viable option when we go through rough patches. I dated H for nearly a decade, and I know what he's like at his worst. It's not pretty, but it's not nearly bad enough for me to ever contemplate divorcing him.

vlagrl29 · December 2013

DH is from a divorced family. His mom has been married 3 times and his dad twice I think. It's really made him who he is. He cares so much about our family. My mom got married when she was 18 to get out of her mom's house and then married my dad who she is still with. Everyone in my family has been divorced at least once except my dad and my late grandfather.

hoffse · December 2013

Yeah I think the normalization of it matters a lot. I'm totally generalizing here, and I have no proof of this, but I suspect divorce is less common in the south than other areas of the country, simply because of the whole Bible belt thing. H and I are not particularly religious, but a lot of our friends are, and many of those attitudes have seeped into the social fabric around here. For better or for worse.

We're also Catholic, and there's the whole "do not divorce" thing that happens in the Catholic church. I know of one person who has ever successfully gotten an annulment (and it was for child abuse). And I know one girl who has been trying to marry a divorced guy for a couple years and finally gave up and went Episcopalian because the Catholic church wouldn't give him an annulment.

Personally, explaining a divorce to my friends and family would probably be worse than anything H would do to inspire the divorce in the first place. Obviously if H did something horrendous to me I would get the full support of my family and friends. But unreconcileable differences wouldn't be enough.

Ducktale · December 2013

Maybe that's why I don't feel a strong need to cover my butt financially, because I have not really witnessed anyone close to me get screwed over financially. Both our parents and most people we know have not gotten divorced.

We got married when we were still in college, so everything we have we've earned/spent together, all our account are joint, etc. It's not like we were financially independent and THEN got married.

Sisugal · December 2013

It is not necessarily divorce, but definitely a plan to take care of yourself in case "life" happens. Partners can die,accidents happen, people can become disabled, or mentally ill and many other misfortunes can and do happen to some in their life's journey.

You both should have a credit card in your name only. (in addition to a joint card)
You both should have a savings account in your name only (set aside some of your personal spending money)
You both should have you own retirement account
You both should have current skills that would allow employment -earning enough to support yourself without additional income
You both should have life insurance

Have you ever known anyone who got married thinking some misfortune would come their way?

lifeonthehill · December 2013

Financially we do not think about divorce.
We have and do discuss it now that we are getting closer to TTC. He wants to make sure that if we do divorce post kids I am willing to share time equally. He doesn't want to have kids he isn't able to see if we decide to separate. We agreed that we would do our best to stay in the same school system so we could switch week to week. Not that we can make promises on that front but it has made him feel a bit more secure. He came from a divorce that messed with his head. His mom comes and goes. She is involved a few weeks and gets his hopes up and then disappears for months at a time. I feel so bad for him and even though he is 24 I know he is going to battle this for the rest of his life or until she decides to just stay or stay away.

lifeonthehill · December 2013

Financially we do not think about divorce.
We have and do discuss it now that we are getting closer to TTC. He wants to make sure that if we do divorce post kids I am willing to share time equally. He doesn't want to have kids he isn't able to see if we decide to separate. We agreed that we would do our best to stay in the same school system so we could switch week to week. Not that we can make promises on that front but it has made him feel a bit more secure. He came from a divorce that messed with his head. His mom comes and goes. She is involved a few weeks and gets his hopes up and then disappears for months at a time. I feel so bad for him and even though he is 24 I know he is going to battle this for the rest of his life or until she decides to just stay or stay away.

vlagrl29 · December 2013

hoffse said:

Yeah I think the normalization of it matters a lot. I'm totally generalizing here, and I have no proof of this, but I suspect divorce is less common in the south than other areas of the country, simply because of the whole Bible belt thing. H and I are not particularly religious, but a lot of our friends are, and many of those attitudes have seeped into the social fabric around here. For better or for worse.

We're also Catholic, and there's the whole "do not divorce" thing that happens in the Catholic church. I know of one person who has ever successfully gotten an annulment (and it was for child abuse). And I know one girl who has been trying to marry a divorced guy for a couple years and finally gave up and went Episcopalian because the Catholic church wouldn't give him an annulment.

Personally, explaining a divorce to my friends and family would probably be worse than anything H would do to inspire the divorce in the first place. Obviously if H did something horrendous to me I would get the full support of my family and friends. But unreconcileable differences wouldn't be enough.

That was pretty much me...I had a great support system thank god and was not at all embarrased by my decision to leave. All I had was a backpack of clothes when I left for my parents house that day. You don't go into marriage thinking something bad will happen, but it can and my motto is hope for the best and prepare for the worst and that's what I've pretty much done since then. I'm a realist about things. I bet there are a lot of the people in the south you talk about that are completely miserable in their marriage yet they stay because of biblical reasons. That's no way to live.

Xstatic3333 · December 2013

Sisugal said:
It is not necessarily divorce, but definitely a plan to take care of yourself in case "life" happens. Partners can die,accidents happen, people can become disabled, or mentally ill and many other misfortunes can and do happen to some in their life's journey.

You both should have a credit card in your name only. (in addition to a joint card)
You both should have a savings account in your name only (set aside some of your personal spending money)
You both should have you own retirement account
You both should have current skills that would allow employment -earning enough to support yourself without additional income
You both should have life insurance

Have you ever known anyone who got married thinking some misfortune would come their way?

This I do think is great advice. We already have separate accounts, but should do more research in this area and work on the life insurance situation. I'll add it to my 2014 goals!

vpine · December 2013

No, we don't make decisions with 'divorce in future' in mind.

Smonet · December 2013

hoffse said:

I don't take it into account for me. That said, I DO take it into account for clients. For instance, I won't speak to a client about an inheritance if I know that client's spouse is on the phone and listening in. But that's to cover my own butt professionally.

H and I talk about money so much that if things started to go south it would really be a race to the accounts. We both know what we have, and we both have access to everything so that actually encourages good behavior - neither of us could do something shady from a financial perspective without the other finding out almost immediately.

I also believe that divorce is one of those things that depends largely on how it is perceived in your social group. My parents are not divorced. H's parents are not divorced. The vast majority of our family members and friends are not divorced. In fact, at our wedding we had 3 people out of 170 who had ever been divorced. It's just not done in my social group unless circumstances are truly awful (ie: abuse, spousal theft, affairs, etc.). In other words, it hasn't been normalized for H and I, so we don't even think of it as a viable option when we go through rough patches. I dated H for nearly a decade, and I know what he's like at his worst. It's not pretty, but it's not nearly bad enough for me to ever contemplate divorcing him.

I agree. Its not something either of us are exposed to much. So, its not on the table in regards to any decisions. I realize its out there, but have no intentions of using it unless the whole game changes.

anssett · December 2013

I'm divorced (and re-married) so, yes! I don't expect my current marriage to end, and I'll fight hard to keep it from ending, but if it does, we're financially prepared. We've talked about it openly, and he and I are on the same page about the importance for individual retirement accounts, etc. We aren't rigid about splitting accounts 50/50, but wherever possible, we're contributing to accounts that can be split up.

sillygoosegirl · December 2013

I don't really think much about the possibility of divorce/splitting up anymore (I did a lot before we were married), but it's always been super important to me that we have a peer marriage. I know too many couples where the power in the relationship is uneven, and money is one of the big places this stems from. DH is a wonderful man whom I trust very much, but I also believe that over time people change to reflect their situation. So it's always been important to me that we each have a unambiguous 50% stake in everything, or as close as is reasonable--nobody is going to leave 401(k) money on the table or anything. I'm not sure how much difference that would make if we got divorced, but I believe it makes a positive difference in the kind of marriage we will have if we stay married.

CuriousKiddosMama · December 2013

We don't think about divorce when we make financial decisions. We both had retirement accounts before we got married, and have continued contributing. Although this year I became a SAHM and will continue as one for probably 5-8 years until our kid(s) get into kindergarten. So I'm not contributing anything because I don't have an income.
I may be completely wrong about this, but I believe that if anything ever happened the accounts would be split based on what we've contributed since we got married. It's really not an option for either of us though, like a pp said, it would have to be something horrendous like abuse, cheating or something.

Ducktale · December 2013

Vikingsfan 71713 said:

We don't think about divorce when we make financial decisions. We both had retirement accounts before we got married, and have continued contributing. Although this year I became a SAHM and will continue as one for probably 5-8 years until our kid(s) get into kindergarten. So I'm not contributing anything because I don't have an income.
I may be completely wrong about this, but I believe that if anything ever happened the accounts would be split based on what we've contributed since we got married. It's really not an option for either of us though, like a pp said, it would have to be something horrendous like abuse, cheating or something.

This is what I was wondering to for when I stay at home.

maple2 · December 2013

I don't know if it is finacially feasible, but legally you can still contribute to an IRA even if you don't have any income as long as DH makes more than the total amount you both want to contribute. See spousal iras on the IRS site http://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/Retirement-Topics-IRA-Contribution-Limits

Sisugal · December 2013

Ditto maple 2 -- you CAN contribute to an IRA when a SAHM - spousal contribution.

WedinVolterra · December 2013

Honestly, no. DH and I do both have our own Roth IRAs but divorce wasn't part of that decision, it just seemed like the natural decision when we realized that it couldn't be a joint account -- but he's my beneficiary and vice versa.

goldiemu · June 2014

I was with my partner for 13 years and California has no common law so when we split I had not legal rights to his 401K and 403B which we both contributed to since he had two plans thus a higher annual contribution limit.

Be very careful what you invest in when you live in California and are not married, The house was not a problem since we were both on the title.

mc0113 · June 2014

I've never thought about divorce, but have thought about what is something happens to DH (he's military). For this reason, we both have our own Roth IRA's we max each year, but our own 401K's. Once the baby comes in December/January I'll probably stay home, but we'll hopefully still contribute fully to my Roth IRA each year, just in case.

Also to note: I don't know if this is true in all states, but here in Pennsylvania - my aunt and uncle are getting divorced and in the agreement, my aunt is entitled to a fairly large percentage (I believe it's 1/2) of everything my uncle earned and saved for retirement over the course of their 20 year marriage.

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