Not so long ago, Melinda and Bill Gates announced they were getting a divorce after 27 years of marriage — and jaws everywhere dropped.
Because of their wealth and their energetic and generous global philanthropy, the couple have had an outsized effect around the world. Late last year, Forbes listed the Microsoft founder’s fortune at about $118 billion, and it has risen to $124 billion since then.
Rich or poor, divorce has the capacity to deal a catastrophic blow to your finances. You don’t have to be as wealthy as Melinda and Bill Gates to find out that planning and an accurate understanding of what you are up against are keys to emerging from a divorce in the best financial shape possible.
If you decide to end your marriage, get a realistic view of how it will affect your bank account. So you won’t be caught by surprise, we’re here to dispel many of the falsehoods about divorce — including myths like these.
1. Keeping cash in a separate account protects it from your spouse
Although many people believe this to be true, it’s definitely not. This is a myth, Florida divorce attorney Eric N. Klein tells Money Talks News.
When going through a divorce, you have to complete a financial affidavit, swearing that all of the information is accurate, he explains.
All assets accumulated during the marriage are subject to an equitable distribution. That means money that either spouse has saved must be disclosed at the time of final judgment.
2. Women automatically win custody of kids
The notion that women automatically win custody of children in a divorce simply isn’t true, says Klein. “There was a point in time where that may have been the case, but no longer,” he says.
Custody issues are important, and they can affect your future financial commitment. According to The New York Times:
“The ‘tender-years doctrine,’ a court presumption that mothers are the more suitable parents for children under 7, was abolished in most states in 1994.”
That means men, in theory, have an equal chance of winning child custody in a divorce suit.
Despite equality under the law, a disproportionate share of women end up winning child custody. According to a U.S. Census Bureau report issued in 2013, only 1 in 6 custodial parents are fathers.
3. You don’t have to worry about your spouse’s credit card debts
If a credit card is in your name as well as your spouse’s, both of you are on the hook for repayment, Asheville, North Carolina-based financial planner Jean Marie Dillon tells Money Talks News. She says:
“If cards are held jointly, the spouses are jointly responsible for the debt. Prior to a divorce, it is not uncommon for the spouse of lesser means to go on a spending spree and leave the other spouse holding the debtor’s bag. If the debt goes unpaid or delinquent, then both spouses take a hit on their credit scores, and that hit will remain after the divorce.”
4. Women never pay alimony
Men once were the principal breadwinners in traditional marriages, but the nature of the American family and its finances has changed. In many relationships, the woman now is the top earner.
“If the wife is the breadwinner and the husband has a lower-paying job and/or is the custodial parent of the children, it’s quite common for women to pay alimony,” Justin Wood, a mediator and arbitrator serving the central Oklahoma area, tells Money Talks News.
5. You can judge the quality of divorce attorneys by their fees
While people tend to get what they pay for when it comes to divorce attorneys, the difference in hourly rates isn’t a good indicator of the quality of their work, Colorado attorney, arbitrator and mediator James Cordes tells Money Talks News.
He recommends that you look for a divorce attorney you can relate to who will work to get you the best result without overcharging.
6. It will help your case to show your spouse cheated
You may feel outraged if your spouse commits adultery, but moral indignation likely won’t help when you divide assets.
Most states have some type of “no fault” divorce law, says Ken McRae, a Kansas attorney. McRae tells Money Talks News that this means the court doesn’t concern itself with who caused the breakup. “As a result, an affair will not usually impact the division of assets or debts,” he says.
7. The home is the biggest asset at stake
Sometimes the value of vacation homes, individual retirement accounts and businesses exceed the value of a primary residence.
“It all depends on the people and how they spent, saved or invested their money,” says Wood. “Nothing should ever be taken for granted, and questions should always be asked and evaluations made.”
8. You have plenty of time to remove your ex from a life insurance policy
People who delay removing an ex-spouse as the beneficiary of a life insurance policy following a divorce are making a big mistake. No one knows when their life will end. If you die before you change the policy, your ex likely will receive life insurance benefits, even if you have remarried since the divorce.
After a divorce, you should review your life insurance policy and any accounts where you have named a beneficiary, says McRae.
“Often, people will make a beneficiary designation and forget about it,” he says. “You may have forgotten to add your younger children, or you may still have ex-spouses listed as beneficiaries.”
9. If your ex doesn’t pay child support, you don’t have to allow visitation
Two wrongs don’t make a right. While it may not seem fair, courts typically enforce child visitation rights, even if there is a dispute over child support.
For example, the Colorado Department of Human Services states that a parent’s right to visitation exists independently of the payment of child support. Your ex may be a deadbeat, but he or she still has the right to see their child.
10. It’s best to delay divorce until children are grown
Many people put off a divorce if they have young children, saying it’s for the sake of their kids. Klein, the Florida divorce attorney, thinks that’s a “big mistake.” He asks:
“Do you really want to raise children in a house where there is no love and affection between the parents in addition to the animosity, anger and arguing? In my personal opinion, it’s better to divorce so that the children are not conditioned to believe that constant arguing is a way of life as part of a marriage.”
11. A spouse who doesn’t know of your assets can’t claim them
When it comes to disclosing your assets, it’s best to be honest. McRae notes that most divorce settlement agreements provide that if one spouse hides an asset and the other subsequently finds out about it, the entire asset is forfeited.
So, if you place $100,000 in a hidden account and your ex learns about it, her or she could get the entire amount, McRae says.
“Also, there are some high-profile cases of people spending very long periods of time in jail for contempt of court when they refuse to reveal assets the court believes they have hidden,” he says.
12. It’s important to fight for everything you’re entitled to receive
Divorcing spouses can save themselves time and money if they agree to divide assets in a spirit of compromise.
“People will fight over things they do not really want or need because emotions can be overwhelming,” says McRae. “Sometimes it is out of a desire to hurt or deprive the other party, sometimes it is because a particular item has a memory attached to it.”
McRae says he generally recommends focusing on “the three things you most want out of the divorce and being willing to compromise on other things in order to achieve those top objectives.”
13. You’re always better off settling out of court
While it’s usually less expensive to settle a divorce amicably, there are times when a trial is necessary. In some cases, one spouse may want to settle the case, but the other won’t cooperate.
If you believe your marital partner is deliberately hiding wealth, you may need to bring your case before a judge in order to get an equitable distribution of assets.
14. Sole custody means you’re free to move out of state
In general, a child can’t be moved out of state by a custodial parent without permission from the court that issued the custody order.
That means a parent with sole custody may not be able to accept a job that would take them and their child to another part of the country. The noncustodial parent may oppose such a move.
Having custody doesn’t negate your ex’s right to see their child, Wood explains. “Usually, you must remain within 60 miles of each other, unless agreed or awarded otherwise,” the Oklahoma mediator says.
15. You should make major purchases before a divorce
People often believe they should make a big purchase — such as a new car — before they file for divorce. The goal is to make the purchase before the court places a restraining order on large expenditures, to prevent a spouse from dissipating jointly held assets.
In reality, the court likely will make sure your spouse is properly compensated for any large expenditure you make using shared assets. Your ex could even end up owning an item you bought for yourself prior to the divorce. It could be argued that you made the purchase “as means to defraud the other party out of money for self-gain,” Wood says.
16. Most divorce cases go to trial
Trials are the exception rather than the rule.
The vast majority of divorcing couples find it less costly to resolve disputes out of court, says McRae.
17. Both parties must agree in order to divorce
You don’t need to have your spouse’s permission to get divorced, although it’s easier and cheaper if you do. If one spouse declines to sign divorce papers, the spouse seeking the divorce will need to obtain a contested divorce by filing a petition in court.
“You may have to have a trial,” says McRae.
If the case goes to trial, the court will decide on all settlements and divisions of property. Having a contested divorce means you may spend more money on legal fees.
18. It is better to get the house in a divorce settlement
There is security in owning real estate, yet seeking a home in a divorce isn’t always the right financial move.
If there is an outstanding mortgage and the spouse can’t afford to keep up the monthly payments, he or she could end up losing the property to foreclosure.
Also, real estate values fluctuate. If someone decides to sell the home during a drop in the housing market, he or she could end up receiving less money than the home was worth at the time of the divorce settlement.
19. Both spouses will enjoy the same standard of living after divorce
No divorce agreement can guarantee that you’ll have the same standard of living after you separate. That’s because it’s more expensive to support two households than to share expenses with someone else.
In some cases, both divorcing spouses may see their standard of living decline following a divorce.
20. Private investigators and forensic attorneys are too expensive
Hiring an investigator or forensic attorney to find out more about your spouse’s finances can be money well-spent if a spouse is hiding wealth.
Before you can get a fair division of assets, you need to know exactly what they are. When dealing with a spouse who is deceptive, hiring a specialist may be necessary. A superficial examination of assets may leave a lot of money on the table, says Cordes, the Colorado attorney.