Handling divorce post FIRE?

[Moustachienne]

Some post FIRE D's can be hedged by insurance (death, disability), but how do EREs, especially those with still young children, build in insurance against the possible financial challenge of divorce?  A frugal but workable stache for a family will be pressed to support two households.  Has anyone planned for this situation or lived through it?

[LadyMaWhiskers]

I can't wait to see if Mustachians can come up with divorce insurance! Could it be "tending to your marriage?" Mate choice also seems key.

This is a tough question and I suppose, like most things, the devil would be in the details. I can only offer my experience, as I recently went through a divorce. I was not/am not really-truly-post-FIRE, but post FI. The costs of the subsequent real estate liquidation was about $270k in real estate transaction costs and capital gains taxes. This was about 10% of net worth. The costs were actually because I moved across the country pursuant to the divorce, moreso than because of the divorce itself (I was pregnant and unable to envision going through pregnancy and infant-parenting with no family support, so I moved to where my family live.) But this was two building sales. If there had only been one building, I think we would have had to sell it, rather than co-landlord with an ex-spouse. I'm sure people do that co-landlording though....God help them...

So I'm trying to think, what, if anything, does FIRE have to do with divorce and vice versa?

Divorce is notoriously expensive, and neither party is likely to maintain quite the same lifestyle apart as they did together. This isn't unique to FIRE. Of course if one spouse is spendy and one thrifty, that could be less true, or if one or both work and their incomes are quite different.

When in a position of having to set-up a new household, the freedom of FIRE is a boon. But with young kids, freedom is limited too. The thing that seems really relevant to divorce post-FIRE is the presence of significant assets, which drives possible liquidation costs and possible ambiguity about appropriate division. States vary on their treatment of assets held by married couples. One thing divorce law does not consider though is who is "at fault" in the divorce.

I still think the insurance question comes down to mate choice and then being nice. Good Luck!

[K-ice]

I have seen 3 close friends/siblings go through divorce in the past year. All have kids but none are fire.

Maybe the best insurance is to keep seperate accounts, make about the same income & don't fight.

The best of the 3 cases could have gotten messy (literally the ex's words) but if you agree on how to split things the divorce should cost about 2K to make it official. Try to not fight & save your money. Find a lawyer who doesn't want to fight. Her's literally said if this goes to court I'll pass it over to my associate.

Read your laws, disclose your assets, start an excel spread sheet & do a lot of the work yourself. DIY Mustacian divorce ;)

They agreed to keep their own bank accounts & pensions, kept their assets from before the 7y marriage, then she remortgaged the house & bought him out.

The kids can make it messy but I think they found a good solution, here it is...

In most places child support is not an option. It is calculated based on time with the parent and income.

But Mr. X didn't EVER want to pay anything. Mrs. X actually makes more. But Mr. has the "potential" to make more so it could get tricky if he claims he can't affort things. Kids are primarily with Mrs. But see Mr. About 40% so that would be considered 50:50 here. If they earned the same amount no money should change hands.

Technically Mrs. Should have to pay some support then they split extras like daycare, dental, activities...

So they agreed that she would just pay for ALL the extra expenses. These are usually split proportional to income.

Currently because Mrs. X pays for child care & all the extras, even if she paid him  child support the Mr. should pay her back the support + $200/month.

Well there would be no chance to get the money back from him so the $200 is just a wash.
Crunch the numbers in a few years with no child care and she probably needs to pay him a bit.
Crunch them again if the kids have braces & he should pay her. It could be a never ending back and fourth.

Because she makes more, in liew of child support, she agreed to pay for ALL the extras.

He got a bit carried away in his first demand on the extra list incuuding prom dress, cars + insurance at 16, wedding dress and a few more things. She cut it back to the main extras listed in our laws like child care, medical, dental, activities etc. and added the clause "within her budget".

Honestly, I don't know what Dad wouldn't want to spoil their kids with a few extras but at least he's not obligated to do so.

I am a child of divorce too. My Dad is still bitter for the money he paid my mom. Honestly, I think that was just her fair share of the house. My mom complains about how little the child support was as it didn't increase in 16y. Anyway, that's another story but not a model one so I'll leave it out.

Again, the best insurance is to just crunch the numbers yourself and try not to fight.







 

[lakemom]

Some post FIRE D's can be hedged by insurance (death, disability), but how do EREs, especially those with still young children, build in insurance against the possible financial challenge of divorce?  A frugal but workable stache for a family will be pressed to support two households.  Has anyone planned for this situation or lived through it?

Take it off the table as an option.  As long as you are always worried about/thinking about/planning for divorce there is not 100% commitment to the marriage because you are hedging your bets.  I'd say the #1 "insurance" against divorce is to BOTH make the 100% lifetime commitment to each other.  Prioritize the marriage over everything else.  But really, as others have said, if you made the right choice of spouse in the first place chances for divorce are slimmer to start with.

[KMMK]

No kids, not FI yet, going through a divorce. We kept separate finances, made similar amounts of money, and generally had agreements that we were both self-supporting - basically if one of us chose not to work we'd use our own savings, not the other's income. Marrying someone who isn't mean or petty and is generally an independent person, plus no cheating or anything like that, helped us keep the separation amicable. Like above, having our own agreements in place, not letting the lawyers change anything or start any fights, and not caring if the other person comes out a bit ahead, makes things easier.

If there were kids we'd still have some kind of independent finances (retirement accounts are separate anyhow) and if we were figuring out an FI number, I'd make sure that number would support two households, but in a frugal manner.

[Mr. Green]

It depends on the people involved but if it does happen, a couple who both realize finding a way to amicably split assets or even retain joint ownership of them would work out the best financially. This may not be possible if the reasons for the divorce are such that one person wants nothing to do with the other anymore. I can't think or any way that your could "insure" against divorce. Perhaps don't marry in the first place and just own everything jointly?

[Jags4186]

No real way other than amicable splits.

If you were both independently FIRE'd or on a path to it pre-marriage you could have a prenup. If you're going into the marriage with FIRE goals and your potential mate isn't, you could throw your present assets into an irrevocable trust prior to marriage to shield your present assets but likely anything earned after marriage is going to be community property.

All things considered, divorce will destroy your FIRE prospects unless you are a serious earner with low living costs or you already have so many assets that it won't really affect you either way.

[Moustachienne]

Thanks all for the replies.  I agree with Jags4186.  Divorce may well destroy FIRE prospects, heck, it derails average consumerist middle class lives.  Living frugally might be a mitigator, though, just as it is for unexpected layoffs, etc.  Appreciate everyone who counsels marry the right person, don't fight, etc., but honestly, who doesn't intend that going in?  And yet the stats tell the tale.  But maybe a shared FIRE goal also mitigates the risk by rewarding keeping it together and trying to have fun doing it.  :)    I've been married 30 years myself but observe many splits around me with the concomitant drop in lifestyle, usually forth woman.  Still pretty middle class though.

[Mr. Green]

I've been married 30 years myself but observe many splits around me with the concomitant drop in lifestyle, usually forth woman.

For a woman, or a fourth woman, like not third, but fourth?!

[pbkmaine]

  For the woman. Typo.

[Moustachienne]

Saw the typo after I posted but thought context made clear.  " for the woman " it is.  :)

[Rezdent]

Saw the typo after I posted but thought context made clear.  " for the woman " it is.  :)

I think this totally depends on "the woman" (or "man").
When I went through divorce, my income dropped over 75%.
However, my discretionary income went up, way up, and  I was able to dig out of deep debt, although it took years.
He was a high earner, but very very spendy.  That's not why we divorced, but it was a bit shocking to discover.

[LadyMaWhiskers]

Yes! Relief of a spendy spouse can turn things in a positive direction for FIRE!

[CanuckExpat]

but how do EREs, especially those with still young children, build in insurance against the possible financial challenge of divorce?

I once read something that offered one strategy:

My husband and I have been married 20 years, and the secret to our marriage is as follows: We have three kids, and we have a dog. We decided several years ago that if one person left the other one, the person who left would have to take all three kids, and the person who didn’t leave would get the dog.

And that has kept our marriage so strong.

Seems reasonable; kind of like mutually assured destruction of a sorts.