Advice For Friend Going Through Divorce

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Saul
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Advice For Friend Going Through Divorce

Post by Saul » Thu Jul 26, 2018 1:31 pm

Dear Bogleheads,

Looking for some advice for a good friend of mine going through a difficult period of life with a divorce. Thankfully, I have no experience in this area, so looking to the wisdom of the bogleheads.

Background:
- Currently still legally married, going through legal divorce proceedings, lawyers involved
- High income professional, age 30's
- Recent change of job - asking me advice on retirement contributions etc
- Late to saving so no significant portfolio but commitment from now, starting reading whitecoatinvestor book etc.

Questions:

1. Friend does not want to put anything into retirement accounts as is worried they will be at risk of division during divorce process. Similarly does not want to sit on cash in savings accounts for same reason. The hope is the divorce process is resolved asap but friend worries it could drag on for a few months.

For this interim period, until the divorce is finalized, friend's current plan is to 'spend spend spend' and then start saving once there is no risk of division of assets. Not too comfortable with that but regardless that's the current situation. All retirement contributions have been put to '0%'.

Any advice for someone in this situation? To state the obvious please only discuss 'above board' / 'legitimate' type options to consider!

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Pajamas
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Re: Advice For Friend Going Through Divorce

Post by Pajamas » Thu Jul 26, 2018 1:35 pm

She should talk to her lawyer about how to handle her assets and spending in light of the divorce and then follow the advice given.

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MnyGrl
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Re: Advice For Friend Going Through Divorce

Post by MnyGrl » Thu Jul 26, 2018 1:36 pm

Saul wrote:
Thu Jul 26, 2018 1:31 pm
Dear Bogleheads,

Looking for some advice for a good friend of mine going through a difficult period of life with a divorce. Thankfully, I have no experience in this area, so looking to the wisdom of the bogleheads.

Background:
- Currently still legally married, going through legal divorce proceedings, lawyers involved
- High income professional, age 30's
- Recent change of job - asking me advice on retirement contributions etc
- Late to saving so no significant portfolio but commitment from now, starting reading whitecoatinvestor book etc.

Questions:

1. Friend does not want to put anything into retirement accounts as is worried they will be at risk of division during divorce process. Similarly does not want to sit on cash in savings accounts for same reason. The hope is the divorce process is resolved asap but friend worries it could drag on for a few months.

For this interim period, until the divorce is finalized, friend's current plan is to 'spend spend spend' and then start saving once there is no risk of division of assets. Not too comfortable with that but regardless that's the current situation. All retirement contributions have been put to '0%'.

Any advice for someone in this situation? To state the obvious please only discuss 'above board' / 'legitimate' type options to consider!
He doesn't need to spend all his assets to keep her from getting them. His attorney should be telling him how to do this.

H-Town
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Re: Advice For Friend Going Through Divorce

Post by H-Town » Thu Jul 26, 2018 1:42 pm

Saul wrote:
Thu Jul 26, 2018 1:31 pm
For this interim period, until the divorce is finalized, friend's current plan is to 'spend spend spend' and then start saving once there is no risk of division of assets. Not too comfortable with that but regardless that's the current situation. All retirement contributions have been put to '0%'.
Such a lousy approach to spend it all. If your friend save, the least he/she will walk away with is 50% of the savings.

This is what happened when you don't keep track of income, expenses, assets, and liabilities of you and your spouse.

delamer
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Re: Advice For Friend Going Through Divorce

Post by delamer » Thu Jul 26, 2018 1:51 pm

Classic “cutting off your nose to spite your face,” which isn’t uncommon in divorces.

S/he would rather have a bunch of expensive dinners than get to keep half of any savings that will secure her/his future?

Not to mention whatever tax benefits are being lost.

SelfEmployed123
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Re: Advice For Friend Going Through Divorce

Post by SelfEmployed123 » Thu Jul 26, 2018 1:58 pm

Saul wrote:
Thu Jul 26, 2018 1:31 pm
Dear Bogleheads,

Looking for some advice for a good friend of mine going through a difficult period of life with a divorce. Thankfully, I have no experience in this area, so looking to the wisdom of the bogleheads.

Background:
- Currently still legally married, going through legal divorce proceedings, lawyers involved
- High income professional, age 30's
- Recent change of job - asking me advice on retirement contributions etc
- Late to saving so no significant portfolio but commitment from now, starting reading whitecoatinvestor book etc.

Questions:

1. Friend does not want to put anything into retirement accounts as is worried they will be at risk of division during divorce process. Similarly does not want to sit on cash in savings accounts for same reason. The hope is the divorce process is resolved asap but friend worries it could drag on for a few months.

For this interim period, until the divorce is finalized, friend's current plan is to 'spend spend spend' and then start saving once there is no risk of division of assets. Not too comfortable with that but regardless that's the current situation. All retirement contributions have been put to '0%'.

Any advice for someone in this situation? To state the obvious please only discuss 'above board' / 'legitimate' type options to consider!
Your friend should consider consulting with an attorney so that he/she is absolutely sure of his/her financial exposure. Many people going through divorces also seek out individual therapy. It's one of the most stressful experiences to go through. I'd recommend your friend consider both. The attorney can help educate your friend regarding what the actual financial risks are and the therapist can help your friend talk through/prevent irrational/impulsive decisions and process the pain of the ongoing separation.
"Get what you can, and what you get hold, 'Tis the stone that will turn all your lead into gold." | -Benjamin Franklin

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dm200
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Re: Advice For Friend Going Through Divorce

Post by dm200 » Thu Jul 26, 2018 2:10 pm

This law firm (no personal experience) advertises heavily in this area

https://cordellcordell.com/

DesertDiva
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Re: Advice For Friend Going Through Divorce

Post by DesertDiva » Thu Jul 26, 2018 2:13 pm

Saul wrote:
Thu Jul 26, 2018 1:31 pm
Dear Bogleheads,

Looking for some advice for a good friend of mine going through a difficult period of life with a divorce. Thankfully, I have no experience in this area, so looking to the wisdom of the bogleheads.

Background:
- Currently still legally married, going through legal divorce proceedings, lawyers involved
- High income professional, age 30's
- Recent change of job - asking me advice on retirement contributions etc
- Late to saving so no significant portfolio but commitment from now, starting reading whitecoatinvestor book etc.

Questions:

1. Friend does not want to put anything into retirement accounts as is worried they will be at risk of division during divorce process. Similarly does not want to sit on cash in savings accounts for same reason. The hope is the divorce process is resolved asap but friend worries it could drag on for a few months.

For this interim period, until the divorce is finalized, friend's current plan is to 'spend spend spend' and then start saving once there is no risk of division of assets. Not too comfortable with that but regardless that's the current situation. All retirement contributions have been put to '0%'.

Any advice for someone in this situation? To state the obvious please only discuss 'above board' / 'legitimate' type options to consider!
Ditto to most of the comments posted above. As someone who lost a portion of her 401(k) in a divorce 17 years ago via a QDRO, it is painful to lose what you've worked to accumulate. However as the years have passed, I am back on track. Going on a spending spree to prevent the other party from getting assets just doesn't make sense, and it can set up a person for further bad financial habits. Trying to hide money will cost more in the long run, especially if the other attorney suspects that your friend is sheltering something. It's best to get the process handled quickly, end the attorney bills, and move on with life.
Last edited by DesertDiva on Thu Jul 26, 2018 2:20 pm, edited 1 time in total.
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Jiu Jitsu Fighter
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Re: Advice For Friend Going Through Divorce

Post by Jiu Jitsu Fighter » Thu Jul 26, 2018 2:14 pm

Buy gold bullion with cash.

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vineviz
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Re: Advice For Friend Going Through Divorce

Post by vineviz » Thu Jul 26, 2018 2:14 pm

Pajamas wrote:
Thu Jul 26, 2018 1:35 pm
She should talk to her lawyer about how to handle her assets and spending in light of the divorce and then follow the advice given.
+1 to this.

And one of the questions for the lawyer can be this: "Is it true that assets accumulated AFTER the date of separation are not considered to be marital property?"

I suspect you friend will find the answer to this question will persuade them resume their normal plan of savings.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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dm200
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Re: Advice For Friend Going Through Divorce

Post by dm200 » Thu Jul 26, 2018 2:16 pm

No experience with divorce, but experience in being deposed under oath relating to my finances. Seems to me that even if he spends a lot, her attorney will go after his earnings and will learn of what he has been doing.

Get the advice of an attorney of how to spend or not spend. Also seems to me (no legal credentials) his retirement accounts might have more protection.

Saul
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Re: Advice For Friend Going Through Divorce

Post by Saul » Thu Jul 26, 2018 2:58 pm

Some really great advice - thank you all!

Really important point about clarifying separation date and assets after that. Will pass this on.

Determined
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Re: Advice For Friend Going Through Divorce

Post by Determined » Thu Jul 26, 2018 4:06 pm

My ex took $30,000 from the home equity line and lost it all gambling. This was actually a month before I filed and was the final straw. It was classified as wasteful dissipation, and the assets were divided to make up for his decision. This was significant in our financial situation. Our total earnings were around $120,000 that year.

dekecarver
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Re: Advice For Friend Going Through Divorce

Post by dekecarver » Thu Jul 26, 2018 5:43 pm

If possible, avoid attorneys or at least minimize their impact. Go through a mediator, stay amicable as possible, sell the need to the pending ex-spouse to stay objective as a way for both sides keeping as much of their $ as possible vs giving a huge percentage to the attorneys who may very well want to turn the divorce into a fighting match for gain. Wrap it up as quickly as possible and move on.

denovo
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Re: Advice For Friend Going Through Divorce

Post by denovo » Thu Jul 26, 2018 5:55 pm

Saul wrote:
Thu Jul 26, 2018 1:31 pm
legal divorce proceedings, lawyers involved
-

Any advice for someone in this situation? To state the obvious please only discuss 'above board' / 'legitimate' type options to consider!
Ask the lawyer, duh. Every state has different laws.
"Don't trust everything you read on the Internet"- Abraham Lincoln

MStrambolo
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Re: Advice For Friend Going Through Divorce

Post by MStrambolo » Fri Jul 27, 2018 9:46 am

As other posters have noted, laws vary by state. In New York, where I went through a divorce, once the divorce action was filed with the court there was a "stop the clock" in effect. Assets accumulated after that date were owned by each of us individually and were not marital property. If your friend goes the mediation route the parties can sign an agreement to "stop the clock" while they negotiate.

The assists that were divided in my case were those that were accumulated during the time from the wedding until the action was filed. What the opposing counsel (if you go the lawyer route) or the court will order you to turn over, will be records showing what the two parties owned at the time of filing and for a time before and after, so going on a spending spree now might not have the desired effect. The assists will be gone, but the liability of the divorce settlement will remain.

In New York, independent companies look into your assets - 401Ks, real estate etc. It's hard to hide things. For bank accounts and the like, you need to produce statements so your assets can be determined. Any account that the spouse is aware of will have to be documented under fairly strict penalties. Attempts to hide assets are in effect perjury, and courts take that kind of thing seriously.

As an earlier poster noted, it's painful at the time of the settlement, but as more time passes the pain subsides and you can get on with your life. My divorce cost me $250K, but it really doesn't sting all that much now, 6 years down the road from the settlement. And I'm happy to be divorced and out of a difficult situation.

Jack FFR1846
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Re: Advice For Friend Going Through Divorce

Post by Jack FFR1846 » Fri Jul 27, 2018 9:55 am

Jiu Jitsu Fighter wrote:
Thu Jul 26, 2018 2:14 pm
Buy gold bullion with cash.
This works for FAFSA too......

I'd think paying off all debts including car would be my first act. I'd then maybe have my employer with hold much more for taxes. I'd hire the meanest, slimiest, most cold hearted lawyer available, whatever the cost.
Bogle: Smart Beta is stupid

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dm200
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Re: Advice For Friend Going Through Divorce

Post by dm200 » Fri Jul 27, 2018 10:17 am

Jack FFR1846 wrote:
Fri Jul 27, 2018 9:55 am
Jiu Jitsu Fighter wrote:
Thu Jul 26, 2018 2:14 pm
Buy gold bullion with cash.
This works for FAFSA too......

I'd think paying off all debts including car would be my first act. I'd then maybe have my employer with hold much more for taxes. I'd hire the meanest, slimiest, most cold hearted lawyer available, whatever the cost.
Of course, when being deposed under oath - you would need to disclose it.

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Artsdoctor
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Re: Advice For Friend Going Through Divorce

Post by Artsdoctor » Fri Jul 27, 2018 1:00 pm

dekecarver wrote:
Thu Jul 26, 2018 5:43 pm
If possible, avoid attorneys or at least minimize their impact. Go through a mediator, stay amicable as possible, sell the need to the pending ex-spouse to stay objective as a way for both sides keeping as much of their $ as possible vs giving a huge percentage to the attorneys who may very well want to turn the divorce into a fighting match for gain. Wrap it up as quickly as possible and move on.
Your comment is well put, but I would have underlined "at least minimize their impact." If it's possible to go through a mediator, it'll certainly save a lot of money in legal fees and potentially be a less acrimonious experience. However, I would still meet with a lawyer because there are definitely things that can be done to mitigate future cost outlays (the classic being not becoming a partner in a place of employment until after the settlement). Spending a couple of hours with an excellent attorney might be worth it because you have the potential of approaching the experience from a position of knowledge.

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Steelersfan
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Re: Advice For Friend Going Through Divorce

Post by Steelersfan » Fri Jul 27, 2018 1:15 pm

MStrambolo wrote:
Fri Jul 27, 2018 9:46 am
As other posters have noted, laws vary by state. In New York, where I went through a divorce, once the divorce action was filed with the court there was a "stop the clock" in effect. Assets accumulated after that date were owned by each of us individually and were not marital property. If your friend goes the mediation route the parties can sign an agreement to "stop the clock" while they negotiate.
That's true in my state too. The OP should have his friend find out the law in his state, or discover after the fact that he bought lots of expensive steak dinners on his own dime.

SQRT
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Re: Advice For Friend Going Through Divorce

Post by SQRT » Fri Jul 27, 2018 1:28 pm

In my divorce the “clock stopped” on separation. That is the key date. Valuations made on that date and assets split effective that date. Anything the parties do after that date, relating to asset division, really wouldn’t matter as long as it doesn’t involve obfuscation or dishonest behaviour. Now alimony or support can change with circumstances going forward. In my case my career took off and my “X” got much of the benefit of that over the 15 year litigation period before we finalized it.

Divorces are usually very difficult. Mine was brutal. 15 years of bitter litigation. Asset split was simple in theory although she negotiated a much better deal than 50/50 because I agreed to let spouse and daughter stay in matrimonial home. Tough part was determining ongoing alimony.

Some advice? Be generous, don’t sweat the small stuff, never be dishonest, do everything you can to maintain a good relationship with any children, finally, move on. I needed to be able to “look myself in the mirror” every morning so did everything I could to be ethical and above board,even generous. Luckily I could afford to be generous, although at the time it seemed very costly. I know it’s easier said than done.

It was the most difficult thing I ever did. I have a great relationship with my daughter and my previous spouse is living a very well funded life based on the alimony I pay. No hard feelings at this point, although, I have no significant communication with the “X”.
Last edited by SQRT on Sat Jul 28, 2018 8:03 am, edited 4 times in total.

FreemanB
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Re: Advice For Friend Going Through Divorce

Post by FreemanB » Fri Jul 27, 2018 1:50 pm

dekecarver wrote:
Thu Jul 26, 2018 5:43 pm
If possible, avoid attorneys or at least minimize their impact. Go through a mediator, stay amicable as possible, sell the need to the pending ex-spouse to stay objective as a way for both sides keeping as much of their $ as possible vs giving a huge percentage to the attorneys who may very well want to turn the divorce into a fighting match for gain. Wrap it up as quickly as possible and move on.
While I haven't been through a divorce personally, in most of the ones I've seen it isn't the lawyers that want to drag everything out. Their clients are the ones that get hung up on "winning", fight tooth and nail over petty things, and generally make the whole process painful. They will gladly pay a lawyer $10k to try to avoid paying their ex-spouse $1k.(And most lawyers don't want that, because that extra money comes with a lot of extra work and hassle). The biggest benefit of going through lawyers is that they will negotiate without getting emotionally involved, and they'll tell you if your demands are stupid/silly/illegal. Sure, there are some bad lawyers out there, but when it comes to divorce, they aren't usually the problem.

I also have a friend who spent years working as a family attorney(Primarily divorce), and he shared a lot of good stories about the stupidity he saw people display during divorces. Eventually, he got too tired of it and moved into real estate. A lot less stressful overall.

freebeer
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Re: Advice For Friend Going Through Divorce

Post by freebeer » Fri Jul 27, 2018 1:50 pm

SQRT wrote:
Fri Jul 27, 2018 1:28 pm
In my divorce the “clock stopped” on separation. That is the key date. Valuations made on that date and assets split effective that date. Anything the parties do after that date really wouldn’t matter as long as it doesn’t involve obfuscation or dishonest behaviour.

Divorces are usually very difficult. Mine was brutal. 15 years of bitter litigation. Asset split was simple in theory although she negotiated a much better deal than 50/50 because I agreed to let spouse and daughter stay in matrimonial home. Tough part was determining ongoing alimony.

Some advice? Be generous, don’t sweat the small stuff, never be dishonest, do everything you can to maintain a good relationship with any children, finally, move on. I needed to be able to “look myself in the mirror” every morning so did everything I could to be ethical and above board,even generous. Luckily I could afford to be generous, although at the time it seemed very costly. ..
+1 to the general advice but the rules on such things as impact of separation on marital asset accumulation (and what constitutes separation) vary greatly from state to state. Your friend MUST get advice specific to their state and should totally ignore anecdotes that are not known to be from same state.

SQRT
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Re: Advice For Friend Going Through Divorce

Post by SQRT » Fri Jul 27, 2018 2:21 pm

freebeer wrote:
Fri Jul 27, 2018 1:50 pm
SQRT wrote:
Fri Jul 27, 2018 1:28 pm
In my divorce the “clock stopped” on separation. That is the key date. Valuations made on that date and assets split effective that date. Anything the parties do after that date really wouldn’t matter as long as it doesn’t involve obfuscation or dishonest behaviour.

Divorces are usually very difficult. Mine was brutal. 15 years of bitter litigation. Asset split was simple in theory although she negotiated a much better deal than 50/50 because I agreed to let spouse and daughter stay in matrimonial home. Tough part was determining ongoing alimony.

Some advice? Be generous, don’t sweat the small stuff, never be dishonest, do everything you can to maintain a good relationship with any children, finally, move on. I needed to be able to “look myself in the mirror” every morning so did everything I could to be ethical and above board,even generous. Luckily I could afford to be generous, although at the time it seemed very costly. ..
+1 to the general advice but the rules on such things as impact of separation on marital asset accumulation (and what constitutes separation) vary greatly from state to state. Your friend MUST get advice specific to their state and should totally ignore anecdotes that are not known to be from same state.
Agree my divorce was in Ontario, Canada. A jurisdiction often considered being relatively “female friendly”. (Especially by men ). Every jurisdiction will be different.

Jack56
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Re: Advice For Friend Going Through Divorce

Post by Jack56 » Sun Jul 29, 2018 3:42 pm

Unfortunately there may be some sense to your friend's strategy because if he is the high earner a lot of what he earns and doesn't spend may be given to his spouse and if he is the low earner his standard of living may be taken into account in determining the high earner's support obligations. Legal advice is necessary but try to minimize legal expenses because the legal maneuvering will likely accomplish very little except waste money.

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dm200
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Re: Advice For Friend Going Through Divorce

Post by dm200 » Sun Jul 29, 2018 7:19 pm

Anyone going through a divorce needs to engage an experienced attorney who specializes in divorces for folks like you.

Also, try to think of any and every possible situation either party might encounter that could lead to (adverse) unintended consequences. These are two examples of folks I know that encountered these adverse consequences.

1. Pat and Chris. Pat was a federal government employee earning a high salary. Chris was compensated at a somewhat lower level and had some periods of unemployment, etc. Chris also had some health problems. They get divorced and the divorce/property settlement agreements provide for Chris to receive a portion of Pat's federal retirement when Pat retires. Pat keeps working and Chris ends up in bad financial shape - unemployed, bad health, etc. Pat finally retired - and Chris was then ok - with reasonable income from Pat's retirement. I have heard of cases where one ex refuses to retire just to keep the other ex financially strapped.

2. Robin and Angel. Robin was an attorney working for a local government entity. Angel was a public school teacher. Robin had significantly higher income than Angel. Due to health and other issues, Angel retired from teaching. Robin did not retire (collect government pension) but rather got a well compensated position with a trade group. Because of the divorce/property settlement agreements - when Angel filed for retirement income - Robin got a portion of it - even though Robin was well off and getting high income. Angel would only get part of Robin's generous pension when Robin decided to file for it.

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