Not Ready to Divorce? Beware the Pitfalls of Long-term Separation

August 15, 2014

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Meet Christine and Jake — a hypothetical composite couple who incorporates many of the situations I have seen and heard as a CDFA. Christine has long known that her marriage to Jake is essentially over. When he got an apartment in town, it was so he wouldn’t have to drive home overtired after long days at work. He still came home most weeknights and every weekend. But, as they argued more frequently, he spent more time there – and Christine found that she preferred it that way. Eventually, most of his stuff was out of the house, and they’d agreed that living apart was better for them. That was so long ago that if you asked her precisely when they separated, she couldn’t say.

While not motivated to divorce, Christine and Jake have no desire to revive their marriage, either. They’ve realized their basic incompatibility and become comfortable with separation. Even when Christine hears that Jake is seeing someone, she doesn’t really mind. She’s not been entirely alone herself, lately. Living apart, she thinks, is the best of both worlds. 

So, readers, what do you think? “Good for her!” Or, “What is she thinking?”

I can think of many things that could go wrong with this arrangement, and you probably can, too. As a Divorce Financial Strategist™, I’m most concerned that Christine is setting herself up for financial disaster. A long-term separation without a formal legal agreement is asking for trouble. Let’s dive into Christine’s case to see why that’s so.

Being Out of the Loop Financially Can Cause Trouble 
Christine has no control over what Jake does with their money, and what she doesn’t know can hurt her. Living apart, Christine is totally out of the loop, financially. She has no idea that Jake got a major bonus last year — in fact, she assumed that because of the economy, there wasn’t a bonus at all. She also doesn’t know that he purchased an income property, using marital assets for the down payment. In most Community Property states, Christine may be just as responsible for that debt as he is. Being on good terms doesn’t mean Jake won’t make foolish financial decisions while they are separated. And, if he does, she’ll bear the consequences. 

Jake knows divorce is inevitable, and is planning for it, financially. Neither spouse feels urgency to divorce, but Jake recognizes that someday it will happen. He’s thinking, among other things, of the years he’s made do with the small apartment while she’s enjoyed the marital home. It’s beginning to seem fair to him to keep some assets hidden, so that they won’t become part of a divorce settlement. Christine will miss signs that Jake is hiding marital assets. For example, she doesn’t know that he “sold” his expensive boat to his brother for a pittance, who will “sell” it back to him once the marriage is legally dissolved. 

And if Jake’s financial status takes a dive, Christine is out of luck. One reason it’s been easy for Christine to live a comfortable separated life is that income has never been a problem. Jake’s made excellent money his whole career, and has taken pretty good care of her. Complacency, though, is foolish. If Jake lost his job, became ill or disabled, or experienced other drastic changes during their prolonged separation, the amount of alimony and/or child support she could expect to receive would be significantly affected. 

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