By Shawndi Purselley, CFP®, CDFA®
Divorce is not a fun topic to discuss. In addition, there are no shortage of horror stories out there about how poorly they can go. While you can find many statistics online, most would agree that the divorce rate for Americans is around 40-50% and even higher (60% -73%) for subsequent marriages. I know a thing or two about this topic! I have been divorced twice and am now happily on my third marriage. Although statistics are not in our favor, I am determined to beat the odds.
In 1991 I married my first husband. I was 18 and he was 26 and we were already expecting our first child. We divorced 5 years later. Legally, our divorce was relatively simple. We were too poor to hire attorneys, and we didn’t own anything to fight over, so I represented myself before the court and dissolved the marriage without any complications. When the emotional aspect of divorce calmed down, we made a decision to parent our daughter together. We did that successfully for about 16 years. Don’t get me wrong, we had some bad days in the mix but overall, I think we handled everything well.
In 2001 I married my second husband. I was 28 and he was 27. We had my nothing plus his nothing between the two of us when we got married. Because there wasn’t anything to protect before marriage, we did not complete a prenuptial agreement. We divorced in 2004. I left my second marriage with a 12 year old daughter and a 12 month old daughter. Our divorce was not particularly eventful in terms of legal and financial issues. Once again, I was able to represent myself in the divorce proceedings. He agreed to all the terms of my divorce and I was able to keep basically everything we owned together.
Here are two tips that I believe are important when considering marriage and divorce.
First, a piece of advice. Always make a point to look over your financial property with your spouse. Be present when the tax return is completed and pay attention to what it contains. Make it part of your marriage to review credit reports together, bank accounts, retirement accounts, income, debts and assets. If there is a small business in your marriage, be sure to understand the implications of legal issues, litigation, taxes, assets and liabilities to yourself and your spouse.
A prenuptial agreement is a contract created before marriage. It typically includes all of the property (and debt) of each person and spells out the property rights after marriage. These are not just for the wealthy! If you have children prior to marriage, you may want to consider a prenup. It can ensure your children will have the right to claim their portion of YOUR separate property.
These agreements can also spell out the wishes of each person regarding financial responsibilities during marriage. They can also help avoid complicated arguments during a divorce by laying out ahead of time how property and financials are to be handled in the event of a divorce. When I am counseling clients that are considering marriage, I always suggest speaking to an attorney about the potential need for a prenuptial agreement.
In addition to prenuptial agreements, there is actually such a thing as postnuptial agreements. As you can probably guess, they are similar to prenuptial agreements but they are signed AFTER marriage. If you do not have a prenuptial agreement and are considering a postnuptial agreement, these are best discussed and put in place ahead of any marital problems.
Second, as most of us know by now, Texas is a community property state. This means that most of the property two people acquire during marriage belongs to both and will need to be divided during a divorce. There are exceptions to this for such things like gifts and inheritance as they are typically viewed as separate property even though they may have been acquired during marriage. Separate property is typically defined as property that each person owned before marriage. Each person typically keeps his or her separate property at divorce. Of course, ultimate property division can depend on some very important factors such as disparity of earnings between spouses, difference in age, physical health of one spouse, size of separate estates, taxes, spousal support obligations, and of course fault. These are just a few examples of the things a court will look at when deciding how assets are to be divided.
Marital laws in Texas are complicated! There are no absolutes regarding how a divorce court will divide marital property because each case comes along with its own set of unique facts.
Again, it is always my suggestion that two individuals seek the advice of a trusted attorney in order to weigh the pros and cons of a prenuptial agreement. Keeping in mind, these agreements are not just for wealthy people. Additionally, when considering a divorce, it is also important to consult with your own attorney and secure individual representation.
This article is designed to provide accurate and authoritative information on the subjects covered. It is not, however, intended to provide specific legal, tax, or other professional advice. For specific professional assistance, the services of an appropriate professional should be sought.