By Dr. Joy Eberhardt De Master, WCI ColumnistIt was 2016. The year of the US presidential election. The year the Cubs won the World Series. The year my grandfather died weeks before I gave birth. It was also the year I got divorced to save money.
Yes, you heard that right. I got divorced to save money. My then-spouse and I were looking at the numbers and creating a trust before the birth of our second child (or third child if we count the one that died in-utero). We spoke with our trust lawyer and floated the idea to our accountant. There was no reason we couldn’t get divorced and stay together. If we were divorced, we could file taxes separately. If we were divorced, my earnings didn’t pull up the financial burden of my spouse’s income-based student loan repayment; these loans were in the hundreds of thousands and could easily cost more than our mortgage of $2,390. If I wasn't in the picture, at least in a legally married sense, he could pay less on those loans.
Before you judge me, know that we took out as few loans as possible and tried paying them down. In 2013, my spouse/partner lived away during the week (home on the weekend) to complete their doctoral-level training. (Yes, it was one of the many hoops to get the doctoral degree.) I started a new pediatric job with a large organization (aka more money, like twice the amount!) and cared for our toddler. We paid over $1,000 per month in an attempt to pay down the student loan interest so it wouldn’t be added to the principal, aka becoming compound interest. We paid for two households and childcare. My income doubled, but it didn't feel like much with the new expenses—childcare from $895 to $1,300 per month, rent for a room $600 per month, and who knows how much on gas with the long, long drive to and from Portland every week. It felt futile.
With a second child on the way in 2016, ballooning childcare costs loomed before us—$2,000 per month for my daughter’s part-time nanny and $1,200 per month for my son’s preschool. We also needed a bigger house for a larger family.
We decided to get a divorce.
More information here:
Navigating the Finances of Divorce
Why We Got Divorced to Save Money
How it happened was that the lovely online tax service people often use, which we will refer to as Urbot Axt, gave me the option to pick Head of Household on our tax return. So, I picked it. I noticed I saved money with this designation vs. the Married Filing Jointly option. I played with the numbers and realized over the course of a year that we could save, easily, several thousand dollars. I realized I could not pick that option because we were married, and I began wondering what the benefits of marriage were—at least tax-wise. It turned out there were none for me. And so I got a divorce.
When people talk about the expense of a divorce, they are not talking about the actual process of getting divorced. The process to get divorced in Oregon is annoying but not expensive if you involve no attorneys and live in the same household as your ex. My ex and I did this. And we saved money. I could file as Head of Household. My ex filed as Single. We became partners instead of spouses.
Yes, we were both on board with the idea. Money was a stress. Getting divorced was a way to deal with that stress. West Coast living and parenting are not for the faint of money. The divorce wasn’t ideal or even desired but simply a practical choice to support our children.
We didn’t make it public knowledge. Our families still don’t know, unless they read this column. (We have not actively hidden it from them but have felt that, coming from a conservative religious background, it could cause a rift where a rift wasn’t needed.)
What’s annoying about getting divorced is the stale parenting class, the fact that pregnancy is not viewed as a factor in the divorce decree (the child doesn’t “exist” until it is born, even at 40 weeks gestation), and a judge that doesn’t believe a couple can “figure out parenting details.” We had our divorce rejected by the court due to insufficient data for how we would parent and how expenses would be decided. Twice. When my second child (or third child, depending on how you count) was born, we weren’t sure if we were divorced or not, due to the slowness of the court process. It was rather silly. The registrar in the hospital completed an extra form—in case we were divorced—to acknowledge that my child's father was, in fact, her father.
Soon after the birth of our child, we got documentation from the court that we were officially divorced.
More information here:
Financial Checklist to Complete After Divorce
Has Gotten Divorced Saved Us Money?
Has it been easy? No. Has it been worth it? Yes. Relationships are worth it but not easy. I would say the divorce hasn’t changed our relationship. Parenting has, though. The life of a parent is exhausting and, sometimes, rewarding. I say this with love and respect for all caregivers, including myself.
Have we saved money? Yes and no. Honestly, our expenses have increased with children. Living with neurodiversity is a level of expense of its own with psychological assessments, doctor and therapy appointments, and social and educational supports. Yet, neurodiverse people are also the reason I am even writing this today on a computer in a building with electricity and heating. (There is a reason some children are called twice exceptional.)
Have we picked a better future for our children? I think so. By being divorced, we’ve had more financial flexibility, which has led to job flexibility. We are with our kids more. We can advocate for their needs. We can play with them.
Now, my partner and I are considering whether we should get married again. The new tax laws make it less advantageous to be divorced. Maybe we can. Maybe we will. Until then, we are divorced and living in the same household. And that's the way we like it.
Have you ever thought about getting divorced to make your relationship more tax-efficient? Is this something you would ever try? What kind of pitfalls and advantages do you see?
Thank you author for publishing this post! I agree that how much you love someone is not defined by the government. With the money you and your partner have saved it might even improve your relationship and strengthen the bond between the two of you. Now you have less overall financial stress and can use some of your extra money to donate towards worthy charitable causes. So happy for you author! I think my wife and I may consider this as we have some charities we love as well and would like to give extra $ to.
Re-reading this post since it was in the “most controversial” list, I had a few more thoughts.
First, the author reports that they went over the plan with a trust attorney and a CPA. This makes it difficult to take seriously the declarations of people on here that this violated either state or federal law. The attorney and CPA knew more about the couple’s plans and circumstances than we do. It would be hard to conclude that a doctor who knows almost none of this could be correct when they declare the legal and tax advice the couple received to be wrong.
Second, I would love to see a follow up post in which the author reviews the tax and non-tax implications of being divorced vs married. They investigated it carefully and apparently dealt with things like responsibility for child care, custody, etc. Did they think about long term things like Social Security and inheritance? Or did they assume they would be married again long before those things came up?
Any issues with schools and health care providers about who has authority for decisions about the kids? What does divorce do to asset protection, such as tenants by entirety titles for property? I assume that goes away, if it existed at all in the author’s state.
How does the couple manage health insurance? Can they put the entire family, including the ex spouse, on one employer plan? Or do the kids have to go on one of the adult plans but the spouses cannot be on the same plan?
Did the attorney and accountant point out any other adjustments that would be necessary?
For the adults, I assume that all of the ability to act on each other’s behalf is handled with Durable Powers of Attorney. At least in my state being married does NOT give one spouse automatic authority to do much of anything on behalf of the other. Even straightforward financial transactions require the same formalities as they would if my spouse and I were not married.
Third, is there a plan for triggers that would indicate that it is better to get married again? Ages of kids? College tuition plans? Longer term financial planning? Do you jointly own a home? Cars? Other big ticket items? Any complications from that?
I’m also very interested to hear the answers to all of the above questions. As a 30 yo in gastroenterology fellowship with a long-term partner who is in tech (I.e. both of us have high, possibly >$500K per year earning potential), we are thinking very carefully about the pros/cons of marriage. Neither one of us feels the need to legalize our relationship in the form of a marriage for the sake of “commitment” and do not feel marriage will make our relationship any better than it already is. But, if there are clear benefits in the realms covered in the above questions, then we will pursue it.
The problem with these issues is that they change every few years and they’re different at different income levels and at different ratios of income between spouses. So if one is truly trying to optimize their finances by not marrying, marrying, and getting divorced, that could require multiple changes of marital status over a lifetime.
And what if polymarriages become legal? (Let alone to horses as is feared by some.)
I always wonder if businesses would then carefully have to state “any spousal benefits must be divided amongst all spouse, no multiple benefits will be awarded to more than one spouse” if polymarriages are someday legal. A German joke in the past about their POTUS/ VP equivalent went thus: Q-Why can’t they fly together? A- the multiple widows’ pensions between them (7? marriages) would bankrupt the country.
Even in the US IIRC if you marry 3 separate spouses 20 years each (whilst working?) they can all get 50% your SS benefit. And I figured I got Tricare after divorce if I stayed married for 20 years of his active service, while any 2nd wives of his would also qualify (however think I’d get 50% his pension as would he if we split).
I’m also very interested to hear the answers to all of the above questions. As a 30 yo in gastroenterology fellowship with a long-term partner who is in tech (I.e. both of us have high, possibly >$500K per year earning potential), we are thinking very carefully about the pros/cons of marriage. Neither one of us feels the need to legalize our relationship in the form of a marriage for the sake of “commitment” and do not feel marriage will make our relationship any better than it already is. But, if there are clear benefits in the realms covered in the above questions, then we will pursue it.
You becoming a GI doc and your spouse a tech, there is going to be a major pay discrepancy between the two you. This means there may be a significant tax advantage by getting legally married and filing federal taxes jointly. Getting legally married may also save you in health/dental/eye insurance as well as car insurance. Even if your spouse decides to work only part-time after having children, your spouse can work just enough to maximize the employer sponsored retirement plan which would lower your tax burden in the current tax year, as well as further secure your joint nest egg for retirement. So yes, assuming the marriage works out and you don’t end up with burdening spousal support, you come out financially ahead by getting legally married. This is overly simplistic and makes a number of assumptions like your potential spouse does not carry much debt, in particular student debt. If your potential spouse carries a fair amount of student debt, and the two of you get legally married, it would be very unlikely your spouse would qualify for student debt forgiveness. So lots of variables to consider. The cost of a CPA and/or tax advise may be a worthy investment for both of you as a couple before signing a marriage certificate.
[Ad hominem, political attack deleted.]
Do not confuse love and partnership with marriage. They may be traditionally related, but they are separate entities. A marriage certificate is merely a legal document dictating the merging and distribution of assets and liabilities plus whatever benefits and/or penalties the various employers and governments impose for owning this legal document. Everyone’s finances and tax burden are different. Before getting married (or divorced) it is worth considering calculating the numbers and/or seek professional financial advice from a CPA and/or tax advisor. I’ll give you an example. My wife and I can expect to receive $4,802.00/month each for social security benefits. $4,802.00 multiplied by 2 equals $9,604.00/month. Not bad, right? Well, it turns out that there is a family cap of $6,378.00/month in social security compensation. That means my wife and I would forfeit $3,226.00/month ($38,712/year) for the privilege of owning a valid marriage certificate. We do not plan to subject ourselves to this “marriage penalty”. We plan to be the most lovingly divorced couple when the time comes.
I don’t think that’s true.
https://www.ssa.gov/pubs/EN-05-10044.pdf
. There is no marriage penalty or limit
to benefits paid to a married couple
• If you are married and you and your
spouse have worked and earned enough
credits individually, you will each get your
own Social Security benefit.
• For example, if you are due a Social
Security benefit of $1,200 per month
and your spouse is due a Social Security
benefit of $1,400 per month, the two
of you will get $2,600 per month in
retirement benefits.
Your spouse can EITHER take 50% of your benefit OR 100% of their own benefit, whichever is higher. If I’m wrong about that, I’d love to know it, but please cite chapter and verse.
(from AI) “The maximum amount of Social Security benefits that a family can receive is typically between 150% and 188% of the primary earner’s Social Security benefit, also known as the primary insurance amount (PIA). The exact amount is determined by a complex formula that takes into account the number of family members who qualify and the benefit amount.
—–> The maximum family benefit only applies when two or more family members claim benefits based on the same earnings record. <—— "
My significant other and I did something very similar! It has saved us a significant amount of money over time. Due to her poor credit scores and debt to income ratio at the time it prevented me from investing in real estate. Post divorce, I was able to obtain mortgages for investment properties. Despite the “divorce” we have been living together and raising a family for the past 12 years. If we had remained married, our net worth would be multiple seven figures less than it is today. Who needs a government stamp of approval on a piece of paper to say how you should live your life with your significant other? If people have a problem with it they are not worth my time.