Good Morning Green Panda Friends, and welcome to the last post in our Retirement Planning for Young 20 Something Investors series. Before we decide to get married it is very important to talk about our finances with our spouse. We have to decide if we are going to merge our finances or keep them separate. We have to decide if all of our assets and debts will become joint, or if we will each contribute our own share. It is important to make sure that we are on the same financial page as our spouse; otherwise our divorce could really impact our retirement plans as well as our personal finances.
How Can I Protect My Retirement Plan in case of Divorce?
People should leave a marriage with everything that they brought into it. I personally do not feel that personal assets should be split during divorce unless they were accumulated together. However, my opinion is not the law. In an ideal world couples would keep their assets separate during a marriage and equally contribute to all purchases and expense. This ensures that all personal assets such as personal retirement plans and personal pension plans remain sole assets of the individual who contributed to them. However, this is in an ideal world; it is not the law, nor is it reality.
Very often is the case that one spouse in a marriage earns a higher income than another spouse. Therefore, one spouse may contribute a higher percentage to the monthly expenses and purchases than the other spouse. Although it is advised that all contributions towards expenses are divided equally among both spouses, this is not always possible. Upon divorce the spouse who contributed more towards the expenses may ask to be financially compensated for their contribution over the years. Monthly expenses include housing costs, the utility bills, as well as the grocery bills. Expenses are considered anything that is intangible and/or shared equally by both spouses.
Equally splitting purchases is not as important among spouses. Upon divorce the spouse who paid for a purchase can take the item with them. Purchases include household furnishings as well as vehicles and personal items. Purchases are tangible items that we can physically possess and take with us when we leave the marriage.
What Happens to my Retirement Plan in Divorce?
Usually all assets accumulated during a marriage are split equally among both spouses. However, this may not always be the case. It is important to inquire on your state or provincial laws prior to getting married, this ensures the security of your personal assets and personal retirement plans.
It is important to note that some states and provinces allow us to split our income with our spouse during retirement. This means that the spouse with the higher income during retirement can allocate some of their income to the other spouse. This is a very tax advantageous retirement strategy for couples who retire together.
The best way to protect our retirement plan in case of divorce is to have a pre nuptial agreement. This will ensure that any retirement savings accumulated during the marriage will not be split equally among spouses during a divorce.
The 5 Most Expensive Celebrity Divorces in History According to Forbes:
Kevin Costner and Cindy Silva. After a 16 year marriage Kevin paid his ex wife an $80 million settlement upon divorce.
Harrison Ford and Melissa Mathison. After only 6 years of marriage Harrison Ford paid his ex wife $85 million in their divorce settlement. Melissa Mathison also receives a piece of the future earnings and royalties from the films that Harrison Ford made while they were married.
Steven Spielberg and Amy Irving. Spielberg paid his ex wife $100 million after only 4 years of marriage because Irving contested their prenuptial agreement.
Neil Diamond and Marcia Murphey. After 25 years of marriage Marcia Murphey filed for divorce and was awarded $150 million in a divorce settlement. This amount represented approximately half of Neil Diamond’s net worth at the time.
Michael Jordan and Juanita Jordan. Although their divorce is not yet finalized, it is reported that Michael Jordan earned over $350 million during their 21 years of marriage. If Juanita Jordan is entitled to half of Michael Jordan’s fortune she could receive approximately $175 million in her divorce settlement.
Here are the Other Posts in our Retirement Planning for Young 20 Something Investors Series: