Can Planning for Divorce Actually Save Your Marriage?

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0:33Hey, YMB listeners, it's Pierre Bien-Aimé, and today we're sharing a special episode of What's News Sunday, our weekly show where we dive deep into the big questions behind the headlines. This week, the team explores the cost of divorce, part of an ongoing WSJ series you can find right now on WSJ.com. We'll hear from a certified divorce financial analyst on why the best thing you can do for your marriage might actually be planning for its end. If you enjoyed the episode, be sure to follow What's News wherever you get your podcasts. Going into a marriage is the biggest financial decision that you will make in your life, and it shouldn't be taken lightly because you put years of blood, sweat, and tears into this relationship, and it can financially decimate you.

1:19And so you need to plan for that. That was Kristen Sheeran, the director of the Institute for Divorce Financial Analysts. Yes, that's the real job. And no, she wasn't exaggerating. Certified divorce financial analysts or CDFAs like Kristen are the people brought in to untangle finances when a marriage ends. They figure out what everything's worth, what gets split, and what those decisions mean years down the line. Occasionally, they also have to track down assets that spouses forgot to disclose. So let's get into it.

1:53Kristen, I do have some personal news since we last connected. I actually got engaged last weekend. Congratulations. Thank you so much. And I thought about you over that weekend because I remember you telling me that you believe that it's really important to plan for a divorce, maybe even before you start planning your wedding. Why should I listen to you? And how do I know that that's good advice and not just a sales pitch? As you enter into a marriage, I think that it's somewhat negligent to not also plan for the unfortunate event if that marriage goes wrong. The statistics tell us that at least 40 % of first marriages are going to end in divorce.

2:36The statistics tell us that 60 % of second marriages are going to end in divorce. And you need to protect your financial future. Divorce is one of the most financially devastating events that you can have in your life. And unfortunately, it occurs at a time when most people don't have the opportunity or the time to financially recover from that. And so it's hugely impactful for you and your spouse to be on the same page and to be working in conjunction towards the same financial goals. And are those negative financial outcomes that you just spoke about the same for both men and women? Women are disproportionately impacted by divorce.

3:19Women make the decision to be stay-at-home caretakers. More women need to realize that those are years that they're going to be outside of the workforce. And those are years that they are not going to be investing in their own careers, potentially investing in their own 401ks. So prenuptial agreements are usually the best way for people to protect themselves financially in the event of divorce. What is a prenup and what does a good one look like? The prenuptial agreement is a contract between a husband and a wife, and it can literally contain almost anything that you want it to contain as long as it's not against public policy.

3:55For example, you can't put sexual favors into a prenup. You can't put restrictions on conduct after the divorce. But what you can put in a prenup is, and this is the type of prenup that I'm going to insist that my children have, is that you can say, if and when we do get divorced, here's how we're going to do it. We're going to have mediation that contractually has to occur. We are going to utilize a certified divorce financial analyst as part of our divorce process to ensure that the numbers are correct and that everyone understands the financial piece of the divorce. We're going to bring in professionals who are specialists to help us make good, mindful decisions about our divorce.

4:36And so a prenuptial agreement can ensure that a divorce takes place in a reasonable amount of time for a reasonable cost. That sounds like a lot of work, especially at a time when a couple is probably more focused on things like tasting cakes or picking out dresses. How do you make sure that starting that conversation doesn't kill the vibe or the romance? Honestly, it has the potential to strengthen your marriage. I always tell people that you would not enter into a business relationship without an operating agreement and a plan for how you're going to manage your finances with your business partner.

5:11Well, a marriage is no different. And the person that you're marrying, this is your financial partner in your life journey. And it's really important that you're both on the same page and that you both have the same understanding about how you're going to manage finances during your marriage. And if you're willing to have those conversations, I think that it can strengthen your marriage. Coming up, how to protect yourself in marriage, even if you didn't sign a prenup. And how to make sure those separation agreements hold up in court. That's after the break. Trading at Schwab is now powered by Ameritrade, giving you even more specialized support than ever before.

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6:24So far, we've been talking about planning ahead before anything goes wrong. But if you're already married, is it too late to get an agreement in writing? No, if you're already married, you can enter into a post-nuptial agreement. It's a contract between a husband and a wife where you can agree on certain terms. And you can agree, this is what we're going to do with the house. This is what we're going to do with our retirement. It is important to note that you can't keep your children outside of the court system. The court always has jurisdiction over children in order to keep them safe. But you can put into a prenuptial agreement that you have to go to binding mediation first.

7:00You can put into a postnuptial agreement that you're going to take the recommendations of a child therapist into account. And even if you wind up in litigation over custody at a later date, the judge will generally take those recommendations into consideration as well. But everything else, your property, your money, your finances, you can contract how you're going to handle that in a divorce at any point during your marriage through a postnuptial agreement. Have you seen postnups become more common throughout your career? Yeah, I have. And they do generally come up when there's an issue in the marriage or someone has messed up and then somebody reconciles.

7:40But again, I think it's a great thing, especially if you're going to make the decision to stay in a marriage because it provides that safety and that security. And I think it can be a really positive thing. And what are some of the more creative clauses you've seen in post-nup or pre-nup agreements? I have seen quite a bit of creative things in postnaps for second marriages. And that's something that's really important because oftentimes when you're in a second marriage, you have children by your first marriage. And so there can be a lot of confusion. So if you bring certain assets to the marriage, you can designate that those assets are your separate property.

8:23You can do that in a prenuptial agreement. If you co-mingle those assets together, say that you buy a home and you both contribute an unequal portion of money towards the home and then you decide to get divorced, that could potentially impact your grown children and their inheritances and their college funds. So in a second marriage, a prenuptial agreement is arguably more important, one, because your divorce rates increase, and two, because there are a lot of other people that are potentially impacted by your marriage or your divorce than just the two of you. What about things like transparency?

9:04Can I force my partner to let me go through his phone? You can force transparency. You can't actually make them do it, but you can build in penalties if they don't. And I think that that's something that could potentially be very important depending on the nature of your relationship. And so those things can bring reassurance. And oftentimes when people feel more secure in their relationships, the relationships last longer. And if they don't, you built in a penalty where you're reimbursed in the event that they violate the contract. What if your spouse or fiance doesn't want to sign a formal agreement?

9:45What are your options then? Once you're already married and they won't sign a postnuptial agreement, there's nothing that you can do. If you're not married yet and they refuse to sign a prenuptial agreement, I don't think I would get married. Going into a marriage is the biggest financial decision that you will make in your life. And it shouldn't be taken lightly because you put years of blood, sweat and tears into this relationship and it can financially decimate you. And so you need to plan for that. It's only prudent planning. Can prenups and postnups be contested? How do you make sure that they're going to hold up in court?

10:22They can be contested. So if you want to keep a prenuptial agreement or a postnuptial agreement, as strong as possible. You want to each have your own attorney review the document and you don't want to have that presented to the other party or signed close to an important event or an important date that could have swayed their decision.

10:47For most of this conversation, we've been talking about planning for a hypothetical separation. But if you're at the point where you're starting the process of divorce and you're considering hiring a CDFA, What do you need to start that process? One of the reasons why I love having a CDFA involved is because I think that they minimize the conflict. It's surprisingly easy to have very intelligent people arguing over the same set of facts and numbers. And what a CDFA does is they come in as a financial neutral and they help everybody understand the financial picture. They help everyone understand what assets are in place and how those assets function.

11:25And they can help you make good long-term decisions during your divorce, which is a time that studies have shown your brain is not functioning at an optimal level because you're in a crisis. How much does it typically cost to hire a CDFA? The CDFA rates generally range anywhere from$200 to$400 an hour. What about tracking down assets that might be contested? Yeah, it's gotten a lot more complicated. And absolutely, that is something that certified divorce financial analysts look for. We look for the holes. We look for the gaps. Oftentimes, that shows up in the tax returns. But with the rise of digital payment apps like Venmo, you can transfer sums of money to another source and you can call that cookies for the bake sale.

12:15Because it may be something completely different. Cryptocurrency is something that we're all learning more about, how to find the wallets, how to trace that data. When you're looking through the financial records, oftentimes you'll find different sources of income that are going different places. Oftentimes what we see these days is that is going through a cash app. So the resources that we're looking at have definitely changed over the years and the places that we need to look for data have definitely changed. That was director of the Institute for Divorce Financial Analyst, Kristen Sheeran. Thanks for joining us.

12:53Thank you for having me. To read more on the journal's Cost of Divorce series, we've linked to it in the show notes.

13:02And that's it for What's New Sunday for April 26. Today's show was produced by Alex Osala with supervising producer Melanie Roy. I'm Imani Moise, and we'll be back tomorrow morning with the brand new show. Until then, thanks for listening.