Notes From My Journal: Love and Marriage
K and I have been lucky in love and in marriage. We’ve stuck it through countless ups and downs and have come through it happy with one another and with the best products of our marriage: our three sons.
We’ve also been lucky with their marriages, as they’ve each found a partner who is easy to be proud of and easy to love.
None of them had pre-nuptial contracts. We were largely in favor of that because we saw the willingness to forgo them as a statement of commitment, a commitment to sharing and valuing one another equally. And if there is one thing a marriage needs more than anything else, it’s that.
On the other hand, one never knows what the future will bring.
Which brings me to the subject of today’s essay…
From My “Work-in-Progress” Basket
“People Change When People Die… or Get Divorced”
When your kids are toddlers, you worry they will kill themselves.
When they are teenagers, you worry they will kill others.
By the time they become adults and show no suicidal or homicidal tendencies, you have less-lethal concerns. But you still worry.
When they get married, you worry that they will get divorced.
And when they have children – when you have grandchildren – you worry about what will happen to them when you’re gone.
If you are fortunate enough to have more wealth than you will likely spend in your lifetime, you may have another concern, too. One that K and I have.
We worry that leaving a significant inheritance might be a spark that razes our children’s marriages, terminates their filial bonds, and gives our grandchildren the wrong idea about money.
K and I have been grandparents for just over two years now. And just recently, our third and final son got married. So I’ve done a lot of worrying about our estate.
Reading Beyond the Grave, a book about estate planning that a book-club friend recommended, has made matters worse. Jeffrey Condon, the author, does a fantastic job of recounting a hundred different ways that leaving money to children can end in unforeseen disaster.
I’ve talked to some of my wealthy friends about my concerns. Some of them are confident that they’ve got everything taken care of because they have wills and trusts and insurance policies in place. Others, like me, have done some estate planning but are not sure they’ve done enough.
The problem is… there are no guarantees. You do your best to create structures that encourage your children and grandchildren to do what’s right by what you leave them. If you are lucky, you have given them some moral values that will guide their decisions. But after you have returned to dust, you have zero direct influence on them.
And you never know. As Joe Gondolfo, an insurance expert that spoke at investment conferences years ago, liked to say: “People change when people die.” To those wise words, I would add, “or get divorced.”
I will report on my evolving thoughts on estate planning in future blog posts. For today, I want to address a single issue: Divorce. Specifically, the question of what happens to inherited money when the couple does not have a pre-nuptial agreement.
A Concern That Any Parent Is Likely to Have
You might be wondering if K and I had a pre-nup. Of course not. We were not only very much in love, we were both poor as church mice when we married. We would never have considered such a thing.
But what about our three boys?
They grew up in a time when pre-nups were commonplace. And they went into their marriages as individuals with some degree of wealth and some potential to inherit more.
So what did they do? They weighed the pros and cons and decided not to do it. And we supported their decisions.
But now that I’m working on my estate plan, I worry. What if one of them gets divorced – and it’s a messy divorce? How would his spouse react? What would she expect? What would she demand? And what would she be legally entitled to?
My boys have significant interest in a family limited partnership. They are also entitled to the value of our house in Delray Beach when we die. I would have thought that these structures were segregated and therefore safe from outside claims. But is that true?
And what about gifted and inherited money? Does it become joint property in a marriage?
When I realized how little I knew about inheritance laws, it was unnerving. So I did some research. For openers, I wanted to understand who is entitled to what in the event of divorce.
If, like me, you want to protect the assets that you are handing down to your children, what I learned about marital property should be of interest to you.
Laws governing the distribution of property in a divorce are made by each state.
There are basically two philosophies that govern these decisions: the concept of equitable property and the concept of community property.
In equitable distribution jurisdictions, marital property is split between the spouses in a manner “deemed fair and just.” This means that one spouse may receive more than 50 percent of all property acquired during the marriage if the court believes it is deserved.
In community property jurisdictions, all property obtained during the marriage is split equally between the spouses.
The Basic Rules of Distribution
Marital property – which is what gets distributed in a divorce – is not the combined total of everything either or both spouses own. It is property that has been or has become the joint property of both partners during the marriage.
That would include such things as the family home and retirement plan assets. It would also include property that was bought by one spouse but enhanced or contributed to in some way by the other spouse. And it is likely to include ownership interest in a business or in real estate or other income-producing property that was acquired during the marriage.
These are the basic “rules.” But there are a few notable exceptions to consider.
* Inheritances – In both community property and equitable distribution jurisdictions, inheritances are not considered marital property. They are treated as separate property belonging to the person who received the inheritance. Therefore, they may not be divided between the parties in a divorce.
* Gifts – Gifts given to one party are considered the property of that person so long as they are kept and managed separately and solely by that individual. (See Intermingling.)
* Intermingling – If an inheritance is combined with community property, or “commingled” in any way, it may lose its separate status and be considered marital property. In that case, it would likely be distributed 50/50.For example, if one spouse inherits money and deposits it into a joint checking account. An inheritance may also lose its designation as separate property if part of it is used to purchase shared items or to pay joint debt.
Okay, that’s all I have on estate planning at the moment. I’ll be telling you more – hopefully much more – as I learn.
It’s Good to Know: What, exactly, is a pre-nup?
A pre-nup (prenuptial agreement) is a contract signed before marriage that seeks to determine certain issues related to property ownership prior to divorce.
Pre-nuptial agreements are useful because they tend to reduce expensive and time-consuming arguments during divorce proceedings. Whether they are beneficial for the marriage overall – well, that’s a question that cannot be answered definitively.
Today’s Word: loathe (verb)
To loathe (LOWth) is to detest or hate intensely. Example, as used by Diana Vreeland, the former editor-in-chief of Voguemagazine: “I loathe narcissism, but I approve of vanity.”
Don’t confuse loathe with its homonym, loath. These two words sound almost the same but have very different meanings.
Loathe ends with a soft “th” – like the “th” in breathe.
Loath ends with a hard “th” – like the “th” in breath. It means unwilling or reluctant, as in “She was loath to try anything new.”
One way to remember the difference: If you can substitute the word hate (which ends with an “e”), use loathe.
Look at This…