Half of all marriages in the U.S. end in divorce, and it’s even higher if it’s a second or third marriage, and more than half of divorces result in a financial crisis. Here’s what you need to know about divorce and your investments.
It’s an inescapable fact that marriage in the U.S. has a 50-50 chance of ending in divorce. While the divorce rate has fallen in the U.S. from 8.2 percent per 1000 total population to 5.1 percent in 2020, it still remains high according to the Centers for Disease Control and Prevention, CDC.
By 2022, half of all marriages in the U.S. ended in divorce. But the rates are much higher when it comes to subsequent marriages, with 60 percent of second marriages ending in divorce, and 73 percent of all third marriages ending in divorce, according to a world population review based on U.S. Census data.
The bottom line: The odds of divorce mean it is wise to make contingency plans to protect your finances should this unfortunate reality occur.
With divorce being at a high level, financial challenges or hardships are equally commonplace.
While divorce can bring financial hardships to men and women, statistics show that women’s finances take a disproportionate hit.
About 64 percent of divorced females report that divorce created a financial crisis, with 59 percent noting divorce created a “wake-up call” for them financially, according to a study by Allianz Life Women, Money and Power study.
According to U.S. News, here are a number of steps you can take to help protect your investments during a divorce.
While it might be easier to have one person manage all finances in certain circumstances, it can be a mistake. Both partners should be aware of the financial picture and all financial transactions and investments. Both should take a role in day-to-day money budgeting and management.
Make sure the names of both persons in the couple are listed on all financial accounts, investments, bank accounts, savings accounts, individual retirement accounts, annuities, and on life insurance policies and other important items such as trusts or royalty-accruing accounts.
These days, many people manage their financial accounts and investments entirely online. Ensure that you have and maintain login access to all your financial accounts and that your spouse does not lock you out of access to any accounts.
It may be wise not to figure everything out on your own, especially if there are significant finances involved. Some financial analysts specialize in divorce situations that can help you plan ahead on how to manage and divide your investments during the divorce process. It’s essential to take your time and make the right financial moves and demands.
As painful as it is, U.S. News advises that there is no advantage to rushing the process and making errors in judgment.
Other issues during a divorce can be child support and alimony. Child support is not taxable to the recipient and not tax-deductible to the payer. However, the tax situation can be different with alimony, as laws have changed. Further, divorce can change your tax situation overall. Consult a tax professional and attorney to learn more about these aspects of the divorce.