Divorce and Community Property States
A dear friend of mine is getting a divorce. It is a very heart wrenching and sensitive subject to talk about with people who are enduring it. Marriage is supposed to be forever. When you say, “I do,” you make a vow to love someone for a lifetime. Unfortunately, concepts like endless love are usually fairy-tale like ideals we tell children until they encounter the real world themselves.
That isn’t to say that there aren’t people who stay happily married for decades or for the rest of their lives. However, that is not the norm. Well over 50% of Americans who marry end up becoming divorced or seperated. About 7 out of every 1,000 Americans end up getting divorced. The statistics get bleaker when you consider that people usually marry more than once in a lifetime.
Over 41% of Americans in their first marriage end up getting divorced. The potential for divorce only increases as Americans marry again and again. About 60% of people who marry a second time get divorced. People who get married a third time aren’t really increasing their odds of happiness either. Over 73% of people who get married a third time get divorced.
One of the leading reasons for divorce is arguments over money. Over 21% of people get divorced over disagreements about money. Divorce can really cost you in the long-term. Exactly how much depends upon what state you live in.
Community Property States
In a community property state all incomes, assets, debts, investments, or property are shared equally by a married couple. Debt incurred by one spouse can become the shared or full burden of the other spouse in the event of divorce or death. Unless both spouses can unanimously agree to a legal arrangement, all assets are spilt and debts shared, 50/50, after divorce in a community property state.
Joint properties and assets become wholly owned by a surviving spouse in the event of death. There are only a few exemptions to community property state law. Like, assets and debts that were gained before a marriage or after a divorce. Or, any inheritances or gifts that were received during a marriage from a third party.
There are nine community property states. These include Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. It pays to understand if you live in one. The average cost of a wedding in the United States ranges between $15,000 and $30,000. Getting married at city hall or in a courthouse can cost less than $100. A divorce in a community property state can mean losing half of everything you own.
Prepare For The Unexpected
The only thing that is more certain than the probability of divorce is death and taxes. You basically have a 50/50 to 60/40 odds of getting divorced after marriage. If you know that you are heading for divorce, then prepare for it sooner rather than later. Update all beneficiary information, wills, and estate planning.
You may want to cancel any joint bank accounts and ensure that all of your assets are in your name. If you live in a community property state, your tax responsibilities after a divorce can become seriously complicated. You may want to enlist the help of a lawyer or financial professional.
Join the FREE Newsletter
Subscribe to more PF Advice and helpful tips straight to your inbox.