As we all found out about a week ago, the Gores have split up. The news offered a lot of exploration into why a couple would divorce after 40 years of marriage. Now the Gores seem as if they are splitting amicably and Tipper probably won’t be worried about her financial future. But that won’t be the same for all of us.
When I write about money and finance, I tend to try to grab something in the news that has caught people’s attention. The Gores divorce announcement was a surprise sort of attention grabber for two reasons. One I mentioned already; that Tipper probably won’t have to worry about money, unless she spends it like Sarah Ferguson, you know, the Fergie of the Royal Family fame. And two, you simply never know, sometimes even when you are in the marriage.
One of the most common stats used when talking about divorce rates is the half of the marriages end in divorce, a number, which Tara Parker-Pope of the NYTimes claims is a political statistic; used by the conservatives wanting better marriage policies while the liberals use it when they want more protection for single moms. Yet that 50-50 chance of success may be more true than not.
So if that’s the case, should we approach the topic marriage, aside from the love, as a financial contract? Should we prepare for divorce in advance?
Yes and no. First off, find out which state you live in. Is it a community property state where assets acquired during the marriage are divided equally (California, Louisiana, and New Mexico) or do you live in a state where equitable distribution is the law if the land (Arizona, Idaho, Nevada, Texas, and Washington)?
Which brings us to the question of what is fair?
Think of it this way, the longer you were married, the greater the likelihood that you will get a 50-50 split of assets. Otherwise the judge will need to look at things like the nature of the property, the responsibilities each of you had in the marriage, whether you have children and who they are going to live with, your health, your education, and your non-economic contribution to the marriage before a judgment is made.
Now that’s great for the asset side. But what about the liabilities?
Liabilities come in all sort of shapes and sizes you might not think of all of them right away. For instance, the house. In some instances, one of you will keep the property. If that is the case, the exiting spouse’s cost will need to be calculated – rent against monthly mortgage payments, taxes and insurance. In some instances, a sale would be order.
Depending on how amicable the divorce is, and in terms of money, getting along even when your not getting along will save you a great deal of money. One trusted appraiser is better than each of you hiring one and then the appraisers hiring a third to get a binding decision. And then what? The two of you will need to decide on whether to sell now and take the loss in a rough market or wait until there is a much better one in which to sell.
And here is a big thing to consider: a mortgage company may require you to refinance the loan and a creditor may want you to reapply for your own credit. So be careful what you think you want. And when you do, bring your best negotiating skills with you.
Once again, this depends on the two of you acting like adults.
But people don’t.
We have all heard the horror stories about one spouse or the other racking up huge credit card bills right before the marriage ends. Even though savings, investments and debt are commingled, keeping track of what you spent, how you paid for it can help a judge decide who spent what and when. Make sure the person who is usually in charge of paying the bills keeps paying them.
Financial infidelity is often the leading cause of the divorce in the first place. If it is done on a joint card, which should be shut down immediately, then those records will help. If the debt was incurred on the sly, the judge will consider this when he takes out the gavel. What they brought to the marriage, student loans for instance, go with them in the divorce. Most of the qualifying bills and debt in a divorce are subtracted from the savings.
Suppose there are moms out at there who make more than their husbands. Do they have to keep their husband in the style in which he has been accustomed?
That’s a good question and considering the fact that women can be making more money than their husbands not only because the gap between incomes is changing but also because the economy has found many women returning to the workplace or perhaps the only one who was able to retain their job. So that scenario is very likely. But no. That’s Hollywood talk. What happened during the union can’t be expected to continue once that union no longer exists.
One piece of advice we can all use if we might be considering this huge move is to become the manager of the team, the one who assembles the right people, lawyers, financial advisors, tax consultants, appraisers, wins – or at least comes out more equitably. You will need to keep files, learn everything you can about what you may not have known and stay calm, cool, and collected.
It might be kind of creepy to think about it this way but if marriage really is just a 50-50 chance, a win/loss possibility, with success being just a coin toss, then acting smart and financially sensible should be the one thing you try to succeed at doing right from the first “I do”.
You can find additional information here and here.
Related posts:
- College, Money and Retirement Planning: An Uneasy Financial Marriage
- Co-Dependent Personal Finance: The Three in Ten Relationship
- Retirement Planning: The Invested Couple or Honey, what have you invested in?
- Student Debt, Your Retirement Plan and Tough Decisions made Young
- The Financial Impact Factor – episode two
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