Is divorce a wise financial move?

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
EdLaFave
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Is divorce a wise financial move?

Post by EdLaFave » Tue Aug 21, 2018 7:44 pm

We are considering divorcing strictly for financial benefit and not because of a change in our personal relationship. Frankly, we’re tired of paying four digits more in tax every year just to be married.

We know the perk we’re after, but we’re just now beginning to look into the potential cons of a divorce and wanted to hear what the boglegeads think.

We don’t and won’t have children, but we are wondering about the following perks and whether there is a way to preserve them or mitigate losing the perks as a result of the divorce:

1. Inheriting each other’s assets (house we own jointly, 403b, IRA, 401k, and taxable accounts) with minimal taxation if one of us were to die.
2. Ability to visit in medical facilities and the ability to make decisions should one of us be unable to make our own decisions.
3. I’m vaguely aware of some kind of SS/medicare/disability perk.
4. Perhaps there are others?
Last edited by EdLaFave on Tue Aug 21, 2018 7:57 pm, edited 1 time in total.

H-Town
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Re: Is divorce a wise financial move?

Post by H-Town » Tue Aug 21, 2018 7:48 pm

If it's strictly for financial benefit, then I would suggest you think twice about it. Or don't do it. There are many ways to make money. In my opinion, marriage is sacred.

Anyways, new tax laws should eliminate marriage penalty for certain tax brackets. Are you two currently at the top bracket?

HappyWorkerBee
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Re: Is divorce a wise financial move?

Post by HappyWorkerBee » Tue Aug 21, 2018 7:50 pm

Depending on the type of health insurance you're using, you may incur more costs by being divorced. This could also be a problem if one of you is on the other's employer sponsored health plan.

You can also expect your car insurance premiums to increase.

EdLaFave
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Re: Is divorce a wise financial move?

Post by EdLaFave » Tue Aug 21, 2018 7:55 pm

We're in the 22% bracket.

We're each on the health insurance plan offered by our respective employers...neither plan charges more for singles vs couples.

I'm not sure we're getting a break on auto insurance since we've maintained the individual policies that we had before getting married. I'll have to look into that.

dekecarver
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Re: Is divorce a wise financial move?

Post by dekecarver » Tue Aug 21, 2018 7:58 pm

Sometimes a business contract can be more expensive than a marriage and vice versa.

Gill
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Re: Is divorce a wise financial move?

Post by Gill » Tue Aug 21, 2018 8:00 pm

You say four digits more in tax. Is this $9,999 or less? Seems like small potatoes to consider a divorce.
Gill

maria00200
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Re: Is divorce a wise financial move?

Post by maria00200 » Tue Aug 21, 2018 8:04 pm

Wow, I would be so hurt if my husband wanted to divorce just for financial reasons. I would re-think this if you love each other. Just my 2 cents.

DesertDiva
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Re: Is divorce a wise financial move?

Post by DesertDiva » Tue Aug 21, 2018 8:05 pm

From what I've seen, divorce financially enriches the attorneys.
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bob1234
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Re: Is divorce a wise financial move?

Post by bob1234 » Tue Aug 21, 2018 8:07 pm

There is no more marriage penalty in the 22% bracket under the new tax law. The bracket for married is exactly double that of single.

EdLaFave
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Re: Is divorce a wise financial move?

Post by EdLaFave » Tue Aug 21, 2018 8:10 pm

Gill wrote:
Tue Aug 21, 2018 8:00 pm
You say four digits more in tax. Is this $9,999 or less? Seems like small potatoes to consider a divorce.
It is very low 4 digits. I don't have the figure in front of me, but it might have been around 1.5k last year. Either way, it is enough for us to prefer having the money in our pockets.
bob1234 wrote:
Tue Aug 21, 2018 8:07 pm
There is no more marriage penalty in the 22% bracket under the new tax law. The bracket for married is exactly double that of single.
Well would you look at that! I should have paid more attention to the new tax code, just assumed it would reflect the old tax code on this issue.

Thanks, it seems this matter is settled.

Gill
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Re: Is divorce a wise financial move?

Post by Gill » Tue Aug 21, 2018 8:12 pm

bob1234 wrote:
Tue Aug 21, 2018 8:07 pm
There is no more marriage penalty in the 22% bracket under the new tax law. The bracket for married is exactly double that of single.
That’s what I had thought. Kind of makes this whole discussion moot.
Gill

Gill
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Re: Is divorce a wise financial move?

Post by Gill » Tue Aug 21, 2018 8:14 pm

:oops:
EdLaFave wrote:
Tue Aug 21, 2018 8:10 pm
Gill wrote:
Tue Aug 21, 2018 8:00 pm
You say four digits more in tax. Is this $9,999 or less? Seems like small potatoes to consider a divorce.
It is very low 4 digits. I don't have the figure in front of me, but it might have been around 1.5k last year. Either way, it is enough for us to prefer having the money in our pockets.
bob1234 wrote:
Tue Aug 21, 2018 8:07 pm
There is no more marriage penalty in the 22% bracket under the new tax law. The bracket for married is exactly double that of single.
Well would you look at that! I should have paid more attention to the new tax code, just assumed it would reflect the old tax code on this issue.

Thanks, it seems this matter is settled.
I’m speechless. :annoyed
Gill

EdLaFave
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Re: Is divorce a wise financial move?

Post by EdLaFave » Tue Aug 21, 2018 8:16 pm

Gill wrote:
Tue Aug 21, 2018 8:14 pm
I’m speechless.
lol and why is that?

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Alexa9
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Re: Is divorce a wise financial move?

Post by Alexa9 » Tue Aug 21, 2018 8:18 pm

Just to continue the discussion, I think it can be a wise move if you do have kids. Single mothers get a lot of government support. Not that I'd want to game the system but it is a known loophole especially among lower income people.

Gill
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Re: Is divorce a wise financial move?

Post by Gill » Tue Aug 21, 2018 8:19 pm

EdLaFave wrote:
Tue Aug 21, 2018 8:16 pm
Gill wrote:
Tue Aug 21, 2018 8:14 pm
I’m speechless.
lol and why is that?
Long as you asked, I can’t believe you were considering divorce to just save a thousand bucks but also based on a misunderstanding of the tax law.
Gill

middistancerunner
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Re: Is divorce a wise financial move?

Post by middistancerunner » Tue Aug 21, 2018 8:20 pm

The social security spousal advantages seem huge to me.

I'm in a very happy, unmarried partnership of 10 years, and am somewhat anti-marriage as a legal construct. I see it as a contract that allows the state to adjudicate a split, and we would rather set up our own terms between the two of us. We think helps our relationship be healthier and more communicative.

That said, I have been increasingly thinking we should get married at some point when we are older (early 30s now), for social security spousal benefits. I will have to learn better how they work in order to fully make the call (and I suppose they might change in the next 35 years), but seems from what I know like a no brainer, with a value dwarfing a few thousand a year now.

There are also a lot of little things you don't get as unmarried partners. Small one: you have to pay extra for a non-spouse additional drivers at most rental companies. Big one: the tax treatment of employer domestic partner benefits. My employer will cover my partner, but I have to pay taxes on the imputed income of the benefit, which will add thousands of dollars to my reported wages. One year of that kind of thing would probably wipe out your gains.

Dottie57
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Re: Is divorce a wise financial move?

Post by Dottie57 » Tue Aug 21, 2018 8:21 pm

Gill wrote:
Tue Aug 21, 2018 8:14 pm
:oops:
EdLaFave wrote:
Tue Aug 21, 2018 8:10 pm
Gill wrote:
Tue Aug 21, 2018 8:00 pm
You say four digits more in tax. Is this $9,999 or less? Seems like small potatoes to consider a divorce.
It is very low 4 digits. I don't have the figure in front of me, but it might have been around 1.5k last year. Either way, it is enough for us to prefer having the money in our pockets.
bob1234 wrote:
Tue Aug 21, 2018 8:07 pm
There is no more marriage penalty in the 22% bracket under the new tax law. The bracket for married is exactly double that of single.
Well would you look at that! I should have paid more attention to the new tax code, just assumed it would reflect the old tax code on this issue.

Thanks, it seems this matter is settled.
I’m speechless. :annoyed
Gill
Gah!!!!

JoeRetire
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Re: Is divorce a wise financial move?

Post by JoeRetire » Tue Aug 21, 2018 8:26 pm

EdLaFave wrote:
Tue Aug 21, 2018 7:44 pm
Frankly, we’re tired of paying four digits more in tax every year just to be married.
For some, marriage isn't worth a few bucks.
For others, marriage is priceless.

I can see why you don't want children. That would have been far more expensive.

EdLaFave
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Re: Is divorce a wise financial move?

Post by EdLaFave » Tue Aug 21, 2018 8:34 pm

Gill wrote:
Tue Aug 21, 2018 8:19 pm
I can’t believe you were considering divorce to just save a thousand bucks
It’s fine that some folks on this thread have an emotional attachment to legal marriage.

I personally don’t want the government involved in my personal relationships and I certainly don’t like a legal contract that hurts me and my spouse.

Folks on this board go through more trouble for less benefit to tax loss harvest and aren’t given a second look. If I could fill out paperwork to save four figures every year in perpetuity (which isn’t the case with the new tax code now) without any negative side effects (which was the query of this thread) then that’s a deal I take all day every day.

Again, it’s fine if others feel some kind of way about legal marriage, but it isn’t correct to project that sentiment onto my consideration process.
Last edited by EdLaFave on Tue Aug 21, 2018 8:37 pm, edited 2 times in total.

mountains
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Re: Is divorce a wise financial move?

Post by mountains » Tue Aug 21, 2018 8:35 pm

EdLaFave wrote:
Tue Aug 21, 2018 7:55 pm
We're in the 22% bracket.

We're each on the health insurance plan offered by our respective employers...neither plan charges more for singles vs couples.

I'm not sure we're getting a break on auto insurance since we've maintained the individual policies that we had before getting married. I'll have to look into that.
If one of you becomes unemployed (even if just temporarily) you can sign up for the other's insurance. Otherwise you pay ACA or cobra. If you ever change employers you can pick the better insurance as well...

Gill
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Re: Is divorce a wise financial move?

Post by Gill » Tue Aug 21, 2018 8:42 pm

EdLaFave wrote:
Tue Aug 21, 2018 8:34 pm
Gill wrote:
Tue Aug 21, 2018 8:19 pm
I can’t believe you were considering divorce to just save a thousand bucks
It’s fine that some folks on this thread have an emotional attachment to legal marriage.

I personally don’t want the government involved in my personal relationships and I certainly don’t like a legal contract that hurts me and my spouse.

Folks on this board go through more trouble for less benefit to tax loss harvest and aren’t given a second look. If I could fill out paperwork to save four figures every year in perpetuity (which isn’t the case with the new tax code now) without any negative side effects (which was the query of this thread) then that’s a deal I take all day every day.

Again, it’s fine if others feel some kind of way about legal marriage, but it isn’t correct to project that sentiment onto my consideration process.
Why did you marry in the first place? There once was a marriage penalty. It’s much cheaper to stay single than marry and later divorce.
Gill

HornedToad
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Re: Is divorce a wise financial move?

Post by HornedToad » Tue Aug 21, 2018 8:47 pm

EdLaFave wrote:
Tue Aug 21, 2018 8:34 pm
Gill wrote:
Tue Aug 21, 2018 8:19 pm
I can’t believe you were considering divorce to just save a thousand bucks
It’s fine that some folks on this thread have an emotional attachment to legal marriage.

I personally don’t want the government involved in my personal relationships and I certainly don’t like a legal contract that hurts me and my spouse.

Folks on this board go through more trouble for less benefit to tax loss harvest and aren’t given a second look. If I could fill out paperwork to save four figures every year in perpetuity (which isn’t the case with the new tax code now) without any negative side effects (which was the query of this thread) then that’s a deal I take all day every day.

Again, it’s fine if others feel some kind of way about legal marriage, but it isn’t correct to project that sentiment onto my consideration process.
The legal and convenience benefits of marriage for Social security, health insurance, etc is worth vastly more than $1k/year. If you were in the $25-50k+ range I could see it but for $1k (that doesn't even exist)?

EdLaFave
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Re: Is divorce a wise financial move?

Post by EdLaFave » Tue Aug 21, 2018 8:48 pm

Gill wrote:
Tue Aug 21, 2018 8:42 pm
Why did you marry in the first place? There once was a marriage penalty. It’s much cheaper to stay single than marry and later divorce.
Gill
First of all, neither of us knew about the marriage penalty until we filled taxes jointly for the first time. That was a nice surprise.

I think we ultimately got married because we thought that is what you’re supposed to do in a committed relationship.

Honestly, I did a lot of things (going to college, buying a house, etc) without any analysis because society drilled it into my head that I’m supposed to. It wasn’t until my late twenties that I started making more conscious/analytical decisions...expectations and norms have tremendous power over people’s lives.

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celia
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Re: Is divorce a wise financial move?

Post by celia » Tue Aug 21, 2018 8:52 pm

EdLaFave wrote:
Tue Aug 21, 2018 7:44 pm
We know the perk we’re after, but we’re just now beginning to look into the potential cons of a divorce and wanted to hear what the boglegeads think.
Even though the "problem" is now solved, let's continue the financial discussion for anyone else thinking the same. To me "cons of a divorce" is the same as "pros of a marriage".

1. As far as Social Security, you have to be married at least 10 years for one person to take the spousal benefit of the other person's work record. When one of you dies, the survivor can then take the spouse's SS if it is more than their own.

2. To contribute to IRAs for each of you, you only need one person of a married couple to have earnings. When you are single and if only one person is working, only the earner will be able to contribute.

3. If you live in a community property state, usually when one of you dies, your jointly-owned property as well as the separate property of the deceased gets a step-up in value.

4. As mentioned earlier, car insurance is usually cheaper because it is assumed that you will often go places in the same car, thus exposing the other car to less liability (while it sits in the garage/driveway).

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Watty
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Re: Is divorce a wise financial move?

Post by Watty » Tue Aug 21, 2018 8:55 pm

This is a situation that would be good to talk over with a reputable fee only financial planner to have then look at all the details.

Be sure to factor in lawyer fees to set this up right. You may need to each have your own lawyer so the legal fees could be significant and they may need to be updated periodically. That could be a lot more than the money you might save.

Morgan Dollar 1921
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Re: Is divorce a wise financial move?

Post by Morgan Dollar 1921 » Tue Aug 21, 2018 9:10 pm

We divorced then re-soldered our union, without the license or the legal state contract, there are several advantages financially even though that was not the initial reason for the split, ACA for the lower of the two incomes (me) is amazingly affordable. She has group federal plan. The taxation of social security begins at $25K provisional income for single status, but is $32 for a couple, thus 16K each, modified adjusted gross income calculations, (MAGI). This item alone can be worth 18K at the top tier of our tax rate. The provisional rate is a sliding scale up to 85% of your social security being taxed. I am currently working on maxing the qualified dividend tax advantage also, for my lower tax bracket. There are other reasons, that I will not discuss now. I am still working on the new Tax Cuts and Jobs Act, so if you see any errors or have additional advice I invite your response.

e5116
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Re: Is divorce a wise financial move?

Post by e5116 » Tue Aug 21, 2018 9:35 pm

EdLaFave wrote:
Tue Aug 21, 2018 8:10 pm
Gill wrote:
Tue Aug 21, 2018 8:00 pm
You say four digits more in tax. Is this $9,999 or less? Seems like small potatoes to consider a divorce.
It is very low 4 digits. I don't have the figure in front of me, but it might have been around 1.5k last year. Either way, it is enough for us to prefer having the money in our pockets.
bob1234 wrote:
Tue Aug 21, 2018 8:07 pm
There is no more marriage penalty in the 22% bracket under the new tax law. The bracket for married is exactly double that of single.
Well would you look at that! I should have paid more attention to the new tax code, just assumed it would reflect the old tax code on this issue.

Thanks, it seems this matter is settled.
While the income ranges for most of the tax brackets are doubled for married couples (getting rid of the marriage penalty there), there IS still a marriage penalty (particularly in high tax states) in that the $10k SALT deduction cap is STILL $10k for married folks. Whereas it'd be $20k for two single people. So, if you're at the max, that costs you $2.2k/year for being married. :twisted: :twisted:

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Re: Is divorce a wise financial move?

Post by LadyGeek » Tue Aug 21, 2018 9:47 pm

This thread is now in the Personal Finance (Not Investing) forum (tax planning).

Please stay focused on the financial aspects.
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TheHouse7
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Re: Is divorce a wise financial move?

Post by TheHouse7 » Tue Aug 21, 2018 9:54 pm

JoeRetire wrote:
Tue Aug 21, 2018 8:26 pm
EdLaFave wrote:
Tue Aug 21, 2018 7:44 pm
Frankly, we’re tired of paying four digits more in tax every year just to be married.
For some, marriage isn't worth a few bucks.
For others, marriage is priceless.

I can see why you don't want children. That would have been far more expensive.
I resent that statement, my wife will always be more expensive than my children! :twisted:
"PSX will always go up 20%, why invest in anything else?!" -Father-in-law early retired.

Jablean
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Re: Is divorce a wise financial move?

Post by Jablean » Tue Aug 21, 2018 10:27 pm

I think there may still be a benefit of divorce when one spouse needs to go on Medicaid for Alzheimers etc in order for the other spouse to continue to have any income. Any ideas on that?

Dottie57
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Re: Is divorce a wise financial move?

Post by Dottie57 » Tue Aug 21, 2018 10:34 pm

Jablean wrote:
Tue Aug 21, 2018 10:27 pm
I think there may still be a benefit of divorce when one spouse needs to go on Medicaid for Alzheimers etc in order for the other spouse to continue to have any income. Any ideas on that?
I asked my mom if she would consider. My dad had dementia. She said NO - She couldn’t divorce after 55 years of marriage. Dad died before he had to go into memory care. Mom has my eternal gratitude.

The Wizard
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Re: Is divorce a wise financial move?

Post by The Wizard » Wed Aug 22, 2018 7:10 am

Gill wrote:
Tue Aug 21, 2018 8:42 pm
...There once was a marriage penalty. It’s much cheaper to stay single than marry and later divorce.
Gill
Not always.
If I was to marry someone with a retirement income of around $50k or less, my federal income tax bracket would drop from 24% all the way down to 22% and my Medicare IRMAA charges would disappear...
Attempted new signature...

Call_Me_Op
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Re: Is divorce a wise financial move?

Post by Call_Me_Op » Wed Aug 22, 2018 7:19 am

Why did you marry in the first place?
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smitcat
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Re: Is divorce a wise financial move?

Post by smitcat » Wed Aug 22, 2018 7:23 am

EdLaFave wrote:
Tue Aug 21, 2018 8:48 pm
Gill wrote:
Tue Aug 21, 2018 8:42 pm
Why did you marry in the first place? There once was a marriage penalty. It’s much cheaper to stay single than marry and later divorce.
Gill
First of all, neither of us knew about the marriage penalty until we filled taxes jointly for the first time. That was a nice surprise.

I think we ultimately got married because we thought that is what you’re supposed to do in a committed relationship.

Honestly, I did a lot of things (going to college, buying a house, etc) without any analysis because society drilled it into my head that I’m supposed to. It wasn’t until my late twenties that I started making more conscious/analytical decisions...expectations and norms have tremendous power over people’s lives.
Divorce is always an option to folks and you will likely claim something like 'irreconcilable differences" if you cannot get along and choose to get divorced.
Divorcing for the specific purpose of financial gain with anything such as taxes, SS and medical status woudl be fraud and woudl be looked upon as theft. Cementing the intent to perform this fraud in the future by posting on line and/or by disclsosing such plans to others would likely be a mistake.
It would only take one individual that was unhappy with your decision to notify said insurance, SS or whatever carrier - some of whom have even paid a % 'reward' for the savings recieved.

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Re: Is divorce a wise financial move?

Post by smitcat » Wed Aug 22, 2018 7:25 am

Dottie57 wrote:
Tue Aug 21, 2018 10:34 pm
Jablean wrote:
Tue Aug 21, 2018 10:27 pm
I think there may still be a benefit of divorce when one spouse needs to go on Medicaid for Alzheimers etc in order for the other spouse to continue to have any income. Any ideas on that?
I asked my mom if she would consider. My dad had dementia. She said NO - She couldn’t divorce after 55 years of marriage. Dad died before he had to go into memory care. Mom has my eternal gratitude.
Yes - money is not an ultimate goal, and your example explains that in an excellent fashion.

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Re: Is divorce a wise financial move?

Post by oldcomputerguy » Wed Aug 22, 2018 7:55 am

EdLaFave wrote:
Tue Aug 21, 2018 7:44 pm
We are considering divorcing strictly for financial benefit and not because of a change in our personal relationship.
I don't want to sound like I'm attacking you, but it seems to me (from the perspective of someone who just celebrated 40 years of marriage) that you are married for the wrong reason, if you can so cavalierly consider throwing your marriage vows in the trash can simply to save a few bucks.
It’s taken me a lot of years, but I’ve come around to this: If you’re dumb, surround yourself with smart people. And if you’re smart, surround yourself with smart people who disagree with you.

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GoldStar
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Re: Is divorce a wise financial move?

Post by GoldStar » Wed Aug 22, 2018 7:59 am

If everything is purely a financial decision to you, perhaps get the divorce and then adopt your ex-wife to regain some of the benefits you have lost.
Here is a thread were someone was considering adopting their girlfriend:
viewtopic.php?t=195760
It will help with items #1 and #2 perhaps.\
Best of luck living a financially-driven existence....

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Re: Is divorce a wise financial move?

Post by alfaspider » Wed Aug 22, 2018 8:09 am

oldcomputerguy wrote:
Wed Aug 22, 2018 7:55 am
EdLaFave wrote:
Tue Aug 21, 2018 7:44 pm
We are considering divorcing strictly for financial benefit and not because of a change in our personal relationship.
I don't want to sound like I'm attacking you, but it seems to me (from the perspective of someone who just celebrated 40 years of marriage) that you are married for the wrong reason, if you can so cavalierly consider throwing your marriage vows in the trash can simply to save a few bucks.
Some people separate the legal institution of marriage from the religious/personal/cultural institution. It's not fair to say the OP is throwing marriage vows in the trash if only legal divorce is on the table.

That being said, it can be hard to separate the legal from other aspects of marriage. Society likes to unify these things. Which means even though you may receive a tax benefit being separate, there are a lot of explicit and implicit social and legal benefits to being married that you may not realize until they are gone. It's very difficult if not impossible to fully replicate those benefits with private contract.

EdLaFave
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Re: Is divorce a wise financial move?

Post by EdLaFave » Wed Aug 22, 2018 8:12 am

smitcat wrote:
Wed Aug 22, 2018 7:23 am
Divorcing for the specific purpose of financial gain with anything such as taxes, SS and medical status woudl be fraud and woudl be looked upon as theft.
If true, that's interesting. What if one were to file for divorce because they no longer, or never did, believe in the legal institution of marriage? Is that legally sufficient or does there have to be a "breakdown" in the relationship? If the state is in the business of assessing the quality/nature of personal relationships, how do they determine when a relationship is "sufficiently" broken, given that many many people have very flawed relationships?

Similarly, would a couple of people be illegally married if their relationship wasn't "sufficiently" strong to justify marriage and they then received tax benefits from the marriage (maybe one individual of the couple doesn't work, allowing the other to pay less in tax)? It would seem only fair if it were "illegal" in both directions, no?
Last edited by EdLaFave on Wed Aug 22, 2018 8:18 am, edited 1 time in total.

knightrider
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Re: Is divorce a wise financial move?

Post by knightrider » Wed Aug 22, 2018 8:16 am

My guess is there is some error in how you are doing your taxes. I can't see why you would owe $1500 more if you file married. Double check all the math and the assumptions.

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Re: Is divorce a wise financial move?

Post by spdoublebass » Wed Aug 22, 2018 8:24 am

Morgan Dollar 1921 wrote:
Tue Aug 21, 2018 9:10 pm
We divorced then re-soldered our union, without the license or the legal state contract, there are several advantages financially even though that was not the initial reason for the split, ACA for the lower of the two incomes (me) is amazingly affordable. She has group federal plan. The taxation of social security begins at $25K provisional income for single status, but is $32 for a couple, thus 16K each, modified adjusted gross income calculations, (MAGI). This item alone can be worth 18K at the top tier of our tax rate. The provisional rate is a sliding scale up to 85% of your social security being taxed. I am currently working on maxing the qualified dividend tax advantage also, for my lower tax bracket. There are other reasons, that I will not discuss now. I am still working on the new Tax Cuts and Jobs Act, so if you see any errors or have additional advice I invite your response.
In regards to the ACA, couldn’t you just have filed Married Filing Separate? I do this so my wife’s income isn’t considered for my ACA plan and student loan consolidation. The only inconvenience is that I no longer can contribute straight to a Roth IRA, I have to contribute to a traditional IrA then convert it over to Roth. Not a big deal takes few seconds.
I'm trying to think, but nothing happens

smitcat
Posts: 2101
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Re: Is divorce a wise financial move?

Post by smitcat » Wed Aug 22, 2018 8:27 am

EdLaFave wrote:
Wed Aug 22, 2018 8:12 am
smitcat wrote:
Wed Aug 22, 2018 7:23 am
Divorcing for the specific purpose of financial gain with anything such as taxes, SS and medical status woudl be fraud and woudl be looked upon as theft.
If true, that's interesting. What if one were to file for divorce because they no longer, or never did, believe in the legal institution of marriage? Is that legally sufficient or does there have to be a "breakdown" in the relationship? How does the legal system determine when a relationship is "sufficiently" broken, given that many many people have very flawed relationships?

Similarly, would a couple of people be illegally married if their relationship wasn't "sufficiently" strong to justify marriage and they then received tax benefits from the marriage (maybe one individual of the couple doesn't work, allowing the other to pay less in tax)? It would seem only fair if it were "illegal" in both directions, no?

"What if one were to file for divorce because they no longer, or never did, believe in the legal institution of marriage? Is that legally sufficient or does there have to be a "breakdown" in the relationship?"
Please refer to an attorney in your state or where you were married for determinations about the specific legality of marraige. If you did not believe in the legal institution of marriage there was no reason why you would enter into it in the first place. Perhaps pull out the marriage forms you signed at the time of your marriage and read them as an initial starting point.

"How does the legal system determine when a relationship is "sufficiently" broken, given that many many people have very flawed relationships?"
Irelavent if you publicly state your sole intention of disolving the marriage os for financial gain.

"Similarly, would a couple of people be illegally married if their relationship wasn't "sufficiently" strong to justify marriage and they then received tax benefits from the marriage (maybe one individual of the couple doesn't work, allowing the other to pay less in tax)?"
Constructing a marriage for the sole reason of financial gain would be fraud. Searching for excpetions is likely a waste of time unless you require legal assistance to defend your position within a legal case.

amateurnovice
Posts: 167
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Re: Is divorce a wise financial move?

Post by amateurnovice » Wed Aug 22, 2018 8:28 am

EdLaFave wrote:
Tue Aug 21, 2018 7:44 pm
We are considering divorcing strictly for financial benefit and not because of a change in our personal relationship. Frankly, we’re tired of paying four digits more in tax every year just to be married.

We know the perk we’re after, but we’re just now beginning to look into the potential cons of a divorce and wanted to hear what the boglegeads think.

We don’t and won’t have children, but we are wondering about the following perks and whether there is a way to preserve them or mitigate losing the perks as a result of the divorce:

1. Inheriting each other’s assets (house we own jointly, 403b, IRA, 401k, and taxable accounts) with minimal taxation if one of us were to die.
2. Ability to visit in medical facilities and the ability to make decisions should one of us be unable to make our own decisions.
3. I’m vaguely aware of some kind of SS/medicare/disability perk.
4. Perhaps there are others?
Why did you even get married? What am I reading?

SQRT
Posts: 954
Joined: Sat Feb 05, 2011 9:44 am

Re: Is divorce a wise financial move?

Post by SQRT » Wed Aug 22, 2018 8:33 am

Gill wrote:
Tue Aug 21, 2018 8:00 pm
You say four digits more in tax. Is this $9,999 or less? Seems like small potatoes to consider a divorce.
Gill
No kidding. Getting divorced for about $1.5k per year. Really? Hardly worth a response?

EdLaFave
Posts: 336
Joined: Fri Dec 26, 2014 2:31 am

Re: Is divorce a wise financial move?

Post by EdLaFave » Wed Aug 22, 2018 8:38 am

smitcat wrote:
Wed Aug 22, 2018 8:27 am
Irelavent if you publicly state your sole intention of disolving the marriage os for financial gain.
I find it surprising and quite interesting that a couple would be forced to remain married if they mutually no longer wished to continue on under the terms of the contract. I had this vague notion that parties, who mutually agreed to new terms, were always free to terminate or modify a previously agreed upon contract...and that marriage would be no different.

I'd also be interested to learn how the legal system handles it if you have one "invalid" reason (wanting a more favorable tax code maybe?) and one "valid" reason (rejecting the institution all together maybe?). Does the first truly negate the second as you suggest?

Very interesting. I might talk to an attorney just out of curiosity.
Last edited by EdLaFave on Wed Aug 22, 2018 8:45 am, edited 1 time in total.

smitcat
Posts: 2101
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Re: Is divorce a wise financial move?

Post by smitcat » Wed Aug 22, 2018 8:41 am

EdLaFave wrote:
Wed Aug 22, 2018 8:38 am
smitcat wrote:
Wed Aug 22, 2018 8:27 am
Irelavent if you publicly state your sole intention of disolving the marriage os for financial gain.
I find it surprising and quite interesting that a couple would be forced to remain married if they mutually no longer wished to continue on under the terms of the contract. I had this vague notion that parties, who mutually agreed to new terms, were always free to terminate or modify a previously agreed upon contract...and that marriage would be no different.

Very interesting. I might talk to an attorney just out of curiosity.
I do not believe you completely read my initial post above...

Divorce is always an option to folks and you will likely claim something like 'irreconcilable differences" if you cannot get along and choose to get divorced.
Divorcing for the specific purpose of financial gain with anything such as taxes, SS and medical status woudl be fraud and woudl be looked upon as theft. Cementing the intent to perform this fraud in the future by posting on line and/or by disclsosing such plans to others would likely be a mistake.
It would only take one individual that was unhappy with your decision to notify said insurance, SS or whatever carrier - some of whom have even paid a % 'reward' for the savings recieved.

The Wizard
Posts: 12453
Joined: Tue Mar 23, 2010 1:45 pm
Location: Reading, MA

Re: Is divorce a wise financial move?

Post by The Wizard » Wed Aug 22, 2018 8:41 am

smitcat wrote:
Wed Aug 22, 2018 7:23 am

...Divorcing for the specific purpose of financial gain with anything such as taxes, SS and medical status woudl be fraud and woudl be looked upon as theft. Cementing the intent to perform this fraud in the future by posting on line and/or by disclsosing such plans to others would likely be a mistake.
It would only take one individual that was unhappy with your decision to notify said insurance, SS or whatever carrier - some of whom have even paid a % 'reward' for the savings recieved.
IANAL, but I totally disagree that divorcing for the sole purpose of saving money on taxes is fraud.
Neither is marrying for the same purpose fraud, in the case where one person works full time and the other not at all...
Attempted new signature...

BuckyBadger
Posts: 849
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Re: Is divorce a wise financial move?

Post by BuckyBadger » Wed Aug 22, 2018 8:42 am

Getting divorced to save $1500 in taxes every year seems like a pretty textbook definition of cutting off your nose to spite your face.

Grt2bOutdoors
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Location: New York

Re: Is divorce a wise financial move?

Post by Grt2bOutdoors » Wed Aug 22, 2018 8:43 am

This is one of those penny wise, pound foolish moves. Who planted this bad seed in your heads?
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

Grt2bOutdoors
Posts: 19529
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Location: New York

Re: Is divorce a wise financial move?

Post by Grt2bOutdoors » Wed Aug 22, 2018 8:48 am

oldcomputerguy wrote:
Wed Aug 22, 2018 7:55 am
EdLaFave wrote:
Tue Aug 21, 2018 7:44 pm
We are considering divorcing strictly for financial benefit and not because of a change in our personal relationship.
I don't want to sound like I'm attacking you, but it seems to me (from the perspective of someone who just celebrated 40 years of marriage) that you are married for the wrong reason, if you can so cavalierly consider throwing your marriage vows in the trash can simply to save a few bucks.
For some, marriage is love, for others, a fabulous party of 3-5 hours, for others, a shiny bauble, a few months of oohs and ahah and the requisite fawning, for others, a new last name, for others, a tax dodge or a bank account or both. In the old days, it was for obtaining a dowry. Today, many times it is just for anterior motives unknown until you are in way over your head.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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