By Jon L. Ten Haagen
This is not a pleasant topic, but with over 50 percent of marriages ending in divorce, I think it is something to address. By the way, the statistics for second marriages is a divorce rate of over 75 percent so this is a topic to make yourself fully aware of and knowledgeable about.
I have unfortunately been divorced twice. The first marriage I was physically old enough, but not mentally. The marriage was a mistake, and we both knew it. The problem with the end of this joining of two people was the involvement at the end by well-meaning parents and in-laws trying their best to help their child. We had no money saved and were scrapping by. The parent (not identified) wanted me to cover all insurances like health, dental, etc. Problem was that we did not have these things and did not have the money to buy them. Without this impediment it would have been a smooth transition back to single-dom.
The second marriage was going to be forever, and we talked many times about starting a family, but life, family and work got in the way until a tragedy struck the families and for reasons I will not go into we divorced. It was painful, but necessary. We are still friends and I am still her financial advisor, but things happen. That is why I am discussing this situation to hopefully make you think about and be aware of an uncomfortable topic. You never know what is around the next corner.
There are things you should be discussing before you get married, such as a premarital agreement, especially if one of the parties has a large amount of assets coming into the marriage. It is not an easy conversation for most, but a necessary one. This is the one where you sit down for a discussion and have a cup of coffee, not the glass of wine. Once you are into the marriage it is almost impossible to bring up the subject of post marital agreements, so the spouse wanting out of the marriage should arm themselves with the information (financial and custodial – if children are involved) to insure you have all the bases covered before it hits the fan.
Do your financial homework – just like you did back in school. It you tried to scrape by then, it is going to be far more painful in this situation. This is far more important than a math test. This is for now and both your futures, financially and emotionally. Be prepared! Gather together all the information and documentation of assets and liabilities which were acquired during the marriage. Assets you owned prior to the marriage are your own. Make sure you document these items before the marriage so they are easily identified if the unfortunate situation arises. Things like both incomes, and where does it come from? Collect documentation of tax returns, financial statements, bank and brokerage statements, closing binders, insurance policies, mortgage statements, credit card statements, estate planning documents then make copies of everything. The other party is doing the same thing so be thorough.
Back for a minute to the separate properties topic. Make a list of what should be considered your separate property – antiques/family heirlooms – to stop your spouse from making a claim against these items. Make a clear documentation of these properties. During my first marriage I inherited some wonderful pieces of furniture from a relative on my mother’s side of the family. Unfortunately these properties no longer reside with me. These properties came be things like items received from a trust distribution gifted to you, things inherited by either of the parties.
This is an important topic: Access to funds. I had a client going through divorce many years ago and they told me the one who gets to the bank savings accounts first wins the first round! Note sure I agree, but they were not in need go funds to live on for a good number of months. It is important to have access to funds at all times in life. I educate potential clients and clients that they should start an emergency fund (funds I can get my hands on within 30 days without a fine or penalty) to be sure they do not have to liquidate an asset at a loss when the monies are needed. These monies during life and the marriage are to protect against the need for a new roof, a furnace, a broken car, etc. These funds can also be used to hire an attorney when a divorce seems to be coming at you. Mediators are usually less expensive than an attorney might be so look into this option. These monies can also help if the financial support is cut off by the other angry spouse. If there is a joint account you might consider moving one half to an account of your own. Confer with counsel before you do any of these things. I am not an attorney or of counsel.
This is just touching of the surface of a very delicate topic, yet a very important one for all parties. It is one you should give some thought to because the numbers unfortunately indicate that a majority of marriages may not turn out the way we all dreamed them to be. I would suggest you talk with your attorney, your CPA and your Certified Financial Planner and any other counsel you are comfortable with before you venture down this wonderful but bumpy road. I wish the very best to each and every one of you for a long and loving marriage.
Please send in your questions, suggestions and topics you would like to have covered. We are here to serve you. Have a wonderful fun summer.