Dear Readers –
From time to time, I will share case studies from my actual clients. I will of course change the names to protect identities, but some of the lessons – especially when it comes to relationships and money – are so universal and I just have to share them with you in the hopes that you can avoid some of these bad mistakes made by very good people.
Dating and marriage, like a fairy tale, the dance of two lives moving as one, the promise of a forever partnership in life through the tragic and victorious – these are the ideas that “Jane” had when she started her marriage so many years ago. Many of us do… so Jane embarked on a new life with her partner, leaving behind her businesses to become a wife and mother. Jane was married to an aspiring financial adviser at a very reputable brokerage and she considered her small businesses expendable for the family good – Besides, Jane adored being a hands on mother. So far, this story is a wonderful tale of love and commitment and family, but here are three very important lessons Jane learned some 23 years later as the marriage failed and the children had grown up and prepared to move out:
- Jane had no knowledge of her families’ finances. She had no idea whether they had money invested, whether they were preparing for retirement or what their total debts were. She had no idea what their tax returns looked like or where they were even stored. She was married to a financial adviser and trusted that those things were being handled. And in many cases they are – but one partner often abdicates their responsibilities in knowing and caring for the couples finances, and in a divorce situation, this becomes extremely problematic. Even in the happiest of marriages it is essential to know what debts and assets you have. In my marriage, I am the financial caretaker, although more often than not, that job is relegated to the husband. I have everything recorded and updated on a flash drive for my husband so that he can review our accounts, knows our debts and has an idea of our financial condition at any time. Even if you don’t participate, the very least you should do is have access. In a divorce, or death or serious illness, getting this information for the first time is an added stress and if there have been any nefarious dealings, it can be almost impossible to find. It gives one of the partners the ability to plan a retreat from the marriage without the benefit of the other partner being able to protect his/herself. Lesson One is ALWAYS KNOW AND HAVE ACCESS TO YOUR FINANCIAL ACCOUNTS INCLUDING ASSETS AND DEBTS AND TAX RETURNS!
- Jane and her husband each received inheritances during their marriage. Jane had used her inheritance to help the family through some difficult financial times and had deposited her money in the joint checking and savings accounts. Jane, of course, felt that she should do this because she was not earning an income. Her husband, however, was better versed in financial matters and kept his inheritance in separate accounts maintaining their identity as “sole and separate” property outside the community. When it was time to disclose the separate and community assets, guess who still had over a million dollars in separate assets not subject to division. Yes, her financial advisor of a husband. – Lesson Two is to SEEK PROFESSIONAL ADVISE AS TO THE TREATMENT OF INHERITANCES AND KEEPING THEM AS SOLE AND SEPARATE PROPERTY. It’s fine to donate some of it to the community, but I think it’s usually better not to immediately and completely comingle it. It’s not about not having access to it for family needs, it’s about being a good custodian of your personal assets.
- When Jane’s husband moved out he insisted that they sell the family home as there was no way Jane was going to be able to afford living there. Jane insisted that she get to continue living there until the children graduated from college. In their discussions, Jane (without the advice of an attorney) agreed to pay back any payments her husband made toward the upkeep of the house (mortgage, taxes, insurance, etc). What Jane was unaware of was that there are legal credits assigned based on the exclusive use of the property by Jane that diminished her payout from the eventual sale. Even if you both mean well, there are legal and tax ramifications to many of the decisions being made that one or both of you may not be aware of. You may believe you are having an amicable split, but you are making permanent decisions that many times cannot be amended. Lesson Three is no matter how civil you are being in a divorce, NEVER MAKE AN AGREEMENT WITHOUT FIRST CONSULTING AND ATTORNEY AND/OR AN ACCOUNTANT.
These are common themes that I’ve seen in divorced couples. one person is left with little to nothing because he/she was unaware of their financial condition, did not participate in the planning and did not seek advice prior to making decisions. It’s not just in divorce cases that these issues pop up, they matter in instances where one partner dies suddenly or is seriously incapacitated for long periods of time. I am not saying that you should not trust your partner and invest fully into your relationship but rather, you should be a partner is ALL matters including finances in order to protect yourself and possibly your partnership in those inevitable times when life takes a bad, unexpected turn.
Oh….and to go back to my opening paragraph, this is a true story, the name “Jane” was changed to protect the individual. Interestingly, the facts are specific to her case, but are so common in the real world this could be any one of a hundred women going through this situation.
If you have any questions about taking steps to take control of your financial health or would like me to address any specific questions not covered in this post, please contact me here or comment below!
We’ll chat again soon!