401k, Divorce, Marriage, Taxes
February 27, 2020
Listen to Podcast Episode:
In this podcast of Ask Suze Anything, Suze focuses on divorce with questions from Women & Money listeners Adam, Maria, Anonymous, and Confidential.
Suze Orman here and you are listening to the Women and Money Podcast on February 27, 2020. Now, why am I starting this podcast with the date? I'll tell you why. Because I was thinking about the podcast on Sunday where I'm talking to you about bonds and investing and all of these things, and I'm realizing, what if somebody listens to this podcast a year from now or three years from now? And they hear me give financial advice and they think that it's advice for today, but it's not, it was for a year or two ago. So, I think it's always important, and I want all of you to keep in mind that when you hear me give specific financial advice, can you please look at the date of the timing and everything of when I did it? So, I just think that's very important because the main point, by the way, that I was making in last Sunday's podcast is very simple. Rather than buying a bond where you're locking up only 2% interest or 1.5% interest, why not just either by dividend-paying stocks or put your money in a savings account? In a savings account, you're going to earn a higher interest rate than you're going to earn in a bond portfolio. So why not just do that? But anyway, that's not the point, because the real point is today is Ask Suze Anything. And this is where you write in a question to AskSuzePodcast@gmail.com and if chosen, I will answer it on this podcast, and again, you never know when I will do it directly with you one on one. And speaking about it one on one, you only have until March 3, 2020, to go to www.SuzeOrman.com, and if you purchase my new book, The Ultimate Retirement Guide that was released two days ago, if you purchase it on www.SuzeOrman.com, you will be entered into a sweepstakes, and one of you will be chosen to have a one on one money makeover with me. So, you better take advantage of it because you just have a few days left. And by the way.And by the way, did you all watch yesterday when I was on Hoda and Jenna on The Today Show on the 10:00 hour? Did you listen to me when I told you you should watch and record it because I gave away the audio of my book for the entire United States? That's what happened yesterday. See, you should listen to me. I'm always trying to educate you and give you stuff, but you just don't follow through sometimes and look at what you may have missed. And, I just want to remind all of you that starting February 29 - March 15, make sure you tune in to PBS to see my new PBS special called The Ultimate Retirement Guide named after my new book. All right, today's Ask Suze Anything is a little bit different. Why not? I've been different lately. And it is about, this entire podcast is emails that I've gotten about divorce, and things that I just want you to know about divorce. And so we're going to start, however, with this first one from Adam. Yes, a man, because remember, the official title of this podcast is Women and Money and the men smart enough to listen. And I like that, I like that everybody's writing, I don't want anybody to be excluded. We have too much exclusion in this world already, I don't want it on my podcast. Anyway, this one is from Adam, and here's what he says. Thanks, Suze. I'm getting married soon. Would you be able to discuss prenuptial agreements in a podcast or send us to any good reference points on how to handle them?I love this email because it's really, really important that before you say I do, before you get married, that honest to God, you have a prenuptial agreement. I know, I know. You don't think it's the sexiest thing in the world. When do you bring it up? You're afraid you're going to ruin the romance. Oh, please give me a break. If you are going to get married, you have got to be able to discuss anything and everything with your spouse to be. And the time that you plan for the what-ifs of life is when you are in a state of love, you'll do anything for each other. You'll give each other the world, not when you are in a state of hate as you're going to hear in a few minutes from the other emails from a few women who have written in. So I love that Adam wants to have a prenuptial agreement. You know, I can remember being in a relationship and not having any money and thinking, oh, well, you know, it didn't really matter because I've been a lesbian my entire life, and we couldn't ever get legally married until a while ago. And so it was like, well, you don't have a prenuptial agreement because you don't get married. But there were things known as cohabitation agreements, and I knew that I should have one. I didn't have a lot of money, but I had enough. And I remember being in a relationship with this one woman, and I didn't have one because I didn't think I needed one. And then in 1995 when my very first book, You've Earned It, Don't Lose It came out, that book went on to sell 800,000 copies in hardback. And then I went on to write my next book, The Nine Steps to Financial Freedom. And the advance on that book, because of how many I sold of You've Earned It, Don't Lose It, was an $800k advance. I think I've told you this story before.And now I'm thinking, oh my God, I need a cohabitation agreement. I don't even like the woman that I'm living with. I've just been waiting for her to leave me because I knew that if I left her, she'd sue me, which she ended up doing anyway. But that's beside the point. So, I brought up the topic of cohabitation agreements with her. Well, she hit the ceiling. It did not go over well at all. And even though she signed one, it didn't hold up because I didn't do it correctly because I didn't know about them back then. But I sure know about prenuptial agreements now, I tell you that. So this is what you need to know. Both of you need attorneys, and both of you really need attorneys that know the ins and outs of prenuptial agreements. Just don't go to a business lawyer to create a prenuptial agreement, you want somebody who really specializes in these, and you both need your separate attorney. You need to do this at least one year before you get married. Do not do it at the last minute, because if you do it at the last minute, it's going to be discharged in court. They are going to say, nope, you did it on the way to the chapel, that you were under pressure, it's not going to hold up. When you draw up the prenuptial agreement, can you please make sure that both of you make changes to it so that the other one can't say I didn't read it, I didn't know what I was doing, I just signed. I just signed it. So, you have to be very careful. And I know you're also out there and you're thinking but Suze, I'm never going to have any money. That's what I thought, too, at one point in my life. And look at me now.But here's the other thing you need to know about prenuptial agreements, and it is this. It also can keep you from acquiring the debt that your spouse happens to get into, even if it's in their individual name when you're married. Because did you know that when your spouse takes out a credit card in their individual name, at the very bottom of it it says, are you married? And if you check that box, yes, it says, then, therefore, please note your spouse is going to be jointly and severally liable for this debt. So here you are and you are married and your spouse has just run up $30k on credit cards. And then you get mad and then you divorce him or her, and then they claim bankruptcy. And then guess what happens? The creditors come knock, knock, knocking at your door. So it is possible that if in a prenuptial agreement that you are not going to be responsible for each other's debt, and you let the credit card companies know that, then no one is going to be knock, knock, knocking at your door. So those are the things that you need to know about prenuptial agreements, Adam, and the reason that you are so smart in getting a prenuptial agreement is this.The next email is from Maria, and she says, dear Suze, first, I have to say I'm a big fan. Second, I need your help. I'm a 54-year-old mother of two beautiful daughters, ages 22 and 20. I am a homemaker with a graduate degree. I am in the process of divorcing my husband of 25 years. I did not know that he's a millionaire when I started the divorce process, and he is insisting the two of us come to an agreement without lawyers. He also told me that he does not want to give me his hardworking money. The only wise thing I did was not to listen to him, and I hired an attorney. To make the story short, after having two attorneys and spending more than $50k, we might reach a settlement in which I will receive $500k in retirement and roughly $1.8 million in cash. I'm very frightened to lose it all. I do not work and this is all I will get to live on for the rest of my life. I need your advice on how to invest the money so that it will last me as long as I am alive. Please help me, I do not trust anybody.So, what's interesting about this email is the fact that this woman was married to her husband of 25 years, and she had absolutely no idea that he was a millionaire. Actually, it's not that he was a millionaire, they were millionaires because they were married. And why didn't she know that? She didn't know it because most likely, she trusted him. She trusted him and probably never, ever checked when she signed their joint tax return. She trusted him and so, therefore, she never ever looked at the balance in his retirement accounts. She trusted him and never looked at how much money was in a bank account, or what were his paychecks, or what was really happening there because he was just going to take care of her. When he, in the end, didn't want her to get any of his hard-working money. Are you kidding me?Women and men, if you are listening to me, "M" just doesn't stand for marriage. It stands for "money," and it is essential that every single month that the two of you sit down and you go over every single statement from your brokerage account, to your retirement accounts, to your savings accounts, to whatever it is, to your home mortgages. You have to make sure that nobody's taking out a loan against your mortgage, like your spouse. You need to do that once every month. And I am not telling you to do something that I myself don't do. KT and I sit down every single month. As soon as the statements come in, and there are a lot of them, every one we go over, we compare it to the month before, we look at all the stocks to make sure that all the buys and the sells are exactly what I wanted to do in my account as well as KT in her account. We look at our balances. Did we go up? Did we go down? If we went down, why did we go down? All of it, every single bill that gets paid, before it gets paid we both look at it and we both have to sign off on it. Every penny that we have, we both know every month we're updated on it.Now, if I can do that, so can you. And you should want to do that. But no, no, you're too busy. You're too busy taking care of the kids, taking care of the grandkids, going out, doing this, going to the movies. I don't know, whatever you're doing, working, maybe you're working 80 hours a week, so you're too busy. But what do you work for? You're working for money. Even if you're at home and taking care of the kids, there aren't enough hours in the week for you to take care of the kids because it's a 24-hour a day job. So you can't be too busy, though, because this is the foundation. Otherwise, you end up like this woman, and I don't want that to happen to you. Although, I wouldn't mind if you ended up with $1.8 million in cash and $500k in retirement. So she didn't even know that her husband had a $1 million in a retirement account. You know they're going to reach a settlement. So maybe she settled here.Here's the other thing that I just want to say, however, and then I'll go on to the next email. And it's this. After having two attorneys and spending more than $50k, let's go back to Adam's email about prenups. It would not cost you $50k to have done a prenup. If they had done a prenup and everything had been in writing and maybe it was a few thousand dollars each, they would not be spending $50k right now. You know, although he probably still would have lied to her, but she probably would have gotten more than $2.3 million. All right, my dear Maria, when you finally do get that money, I will make sure that you are in touch with somebody who you really can trust.Now, here is another one. And I'm just going to say, this is from Anonymous, because I really don't want to use her name, and you'll hear why in a second. Now, here is the other side of the equation. Ready?Hi, Suze. I've been married for 26 years to a passive-aggressive man who never provided any affection and most recently became emotionally abusive. I am the only one who put into a 401k a total of $600k. He has never put in any of his money towards retirement. I have always made much more money than he has. We own our home jointly, $500k estimated value. I have paid all housing expenses, improvements, and everything. This is my question. I do not want my husband to get any of my 401k and want half the money for my share of the house. Is there anything I can do to take my 401k out, pay penalties, and give it to someone like my sister so he can't get it in the eventual divorce? There are no children from this marriage.I want all of you to think about this for a second. Now, we have a woman who doesn't want to pay her husband what legally he is owed. It's the exact reverse of the husband from the previous email not wanting to give his wife what she is legally owed. But do we feel different about this because this man was emotionally abusive to her? He was passive-aggressive. He never put in any of the money, it was all hers. But then, the email before only he put in money, she stayed at home. So do you feel different when it's a woman than when it is a man? And the truth of the matter is, we can't because the law is the law. And when you stay married and you stay in an abusive relationship for 26 years, the price that you pay isn't just that you've been emotionally abused, and you've been miserable for probably 26 years. But that's long enough of a period of time where half your money, legally, will go to him and it will all depend on, does he know how much money this woman has? Is he aware of anything that's going on? And can she make him an offer that maybe he will just settle for? But it goes deeper than that because it's really about what's right. And if you voluntarily, which this woman did, if you voluntarily stay in a relationship that you know you shouldn't be in, then sometimes you have to pay the price.Now, I could easily give this woman ways to get out of this, to figure out how to drain her 401k without having to pay tax, all this stuff. I could figure this out, but it's not the right thing to do. It's not the right thing to do, and this is what I've learned over all these years of doing this. He will pay his price. And you, you, my dear Anonymous, if you do the right thing, you will pay a different price. You will pay the price of success, of possibly meeting somebody else who's a multimillionaire and loves you more than you've ever been loved in your life. But you always have to do what's right, even though I know how much it's going to pain you to do that. Just saying.All right, let's do one more. And here's one that says, dear Suze, I'm in the middle of a divorce. We had our first mediation that did not go too well when we got in the financial topic arena. I purchased the house with my husband in 2017 and there is $70k of equity in the house. He doesn't want to sell it and would like to keep the house. He said he can't afford to give me any of my percentage upfront. He wants to make $1k payments to me, monthly. I still live with him since the house belongs to both of us, and I can't mentally take it anymore.You know, what's funny is, there's a typo in this email and the typo is, "I still love with him." Isn't that interesting? She meant to say, "I still live with him," which is why I read it that way. But that's not what she said at first. She said, I still love with him. I don't know, I just find it fascinating, but anyway.I would like to have at least $3-$5k a month to rent a place and move out. The reason why we can't sell the house is that he owes $170k in back taxes and the IRS put a lien on the house. So, my understanding is that the IRS would take all the equity and apply it to his back taxes.Now, why is that your understanding? Is that what he told you?Is there any way that he can still sell it and I can claim my half anyway? Another part of the whole mess...Another part, really? Alright, just let's keep going.Another part of the whole mess is that he is treating me to make me responsible for his tax debt. I am asking if I am responsible if we have not filed jointly for those years that he owes taxes. I would like to know what my options are and not be bullied by him at the next mediation meeting. I don't understand how he would be able to make me responsible for his back taxes when we didn't file jointly. Also, am I responsible for any of his credit card debt if we never had any joint accounts or credit cards? Please help me get clarity when I stand before the next divorce meeting.So once again, do you understand why I keep saying prenuptial agreements? But here we again have a woman who was married and did she know, did she know that her husband owed back taxes? Did this happen afterward, whatever it may be? But here's what you need to know. If the IRS puts a lien on your home that you own jointly with your spouse, then it depends on how, number one, you file taxes, and number two, what state you live in. Do you live in a community property state or do you not? Because if you live in a community property state, then the law will allow the IRS to collect past-due taxes from either spouse regardless of who owes them or who filed and signed the return. Get that?So the only thing that you have going for you is maybe you don't live in a community property state, and maybe you don't own the house enjoying tenancy with right of survivorship, you own it in tenants in common. And the other thing you have going for you, however, is that you did file separately. So depending on the state that you live in, and that's what you have to check because you didn't say that to me in the email where you live, you very well may not owe taxes on what he owes. But if you don't and you find, however, that they do take your tax refund, so you should never be in a position by the way to get a tax refund when you're in this situation. Always make sure that you actually pay, you know, less, and you owe it at the end of the year, not in penalty of course, you never want to get a tax refund. But if in fact you are owed a tax refund and they garnish it, you should apply to get that refund back under the injured spouse status. All right, so just know that. But it's hard for me to answer this question because I don't have enough information.But the reason that I wanted to talk about it on the podcast is do you understand, everybody, what can happen? How do you not know that your husband's going to be owing $173k in back taxes and how that's going to affect you? And that was only like two years ago, so did that happen before? After all those things matter, which is why it is so important that you know as much financially speaking about the person that you're going to spend, hopefully, the rest of your life with, as you do everything personally about that person. But you don't want to. You don't want to find out, you're just so enthralled with being in love, being in lust, doing all these things, and then you end up in these situations and you take on this incredible financial burden that you had nothing to do with.His credit card debt, it depends, did he accumulate this credit card debt while you were married? And did he check that little box? Like I said a little bit ago, earlier in the podcast, so that you will be responsible for it? I don't have enough answers to these questions. But if you live in a community property state, I don't know, it doesn't look good. If you own the house in joint tenancy with right of survivorship, it doesn't look as good as if you owned it as joint tenants in common or tenants by the entirety. So, that's the other point. How do you take title to your homes? You don't automatically just take him in joint tenancy with right of survivorship, because then it links you in a way that maybe you don't want to be linked. Is it a second marriage? Is it a third marriage? If so, you really wouldn't want to take joint tenancy with right of survivorship, especially if you have children from a previous marriage where you want your half of the house to go to them. Because how you hold title overrides the wishes of your trust and your will, and I can go on and on.Now, just so you know, I will contact this woman. I will write her back and ask her questions and see if I can help her. But I just wanted you to understand the complications that you can get yourself into by not being somebody who cares enough to ask questions. By not being a strong, smart, and secure woman to be able to know when something isn't right. To know when you're being abused, when you're not having affection, when things aren't going right. You should absolutely leave, you should not be afraid to do that, you should be afraid not to. So, the reason that I chose these emails was to say, look at what can go wrong? Look what could go wrong? All right. So the sole purpose, once again, of the Women and Money podcast is so that you know what action to take. You have the courage to take the action, and you love yourself enough to put yourself first and to rise above all of this. In providing answers neither Suze Orman Media nor Suze Orman is acting as a Certified Financial Planner, advisor, a Certified Financial Analyst, an economist, CPA, accountant, or lawyer. Neither Suze Orman Media nor Suze Orman makes any recommendations as to any specific securities or investments. All content is for informational and general purposes only and does not constitute financial, accounting or legal advice. You should consult your own tax, legal and financial advisors regarding your particular situation. Neither Suze Orman Media nor Suze Orman accepts any responsibility for any loss, which may arise from accessing or reliance on the information in this podcast and to the fullest extent permitted by law, we exclude all liability for loss or damages, direct or indirect, arising from use of the information. To find the right Credit Union for you, visit https://www.mycreditunion.gov/. Interested in Suze's Must Have Documents? Go to https://shop.suzeorman.com/checkout/cart/index/.
Get the 4 Must Have Documents that you need to protect your tomorrows today....
Credit & Debt, Saving, Investing, Retirement