She Said, He Fled. Divorce in a FIRE Focused Family

By: Physician on Fire (Guest post by The Vigilante)

“The Court finds no error in the support calculation. The Order remains as entered by the conference officer. Dr. Anderson, I’d recommend you adjust your spending if this is a problem.”

The words of the judge stung. As if the divorce wasn’t bad enough, here was the court just completely ignoring the realities of her finances. Dr. Anderson and her soon-to-be ex-husband had never, ever spent more than $80,000 per year – they discovered Physician on FIRE while she was in med school, and they wisely saved for financial independence and early retirement from graduation on.

Now she owed him more per month than either of them had ever spent alone, so he could “maintain his standard of living” in the divorce. Why? How was this fair? Where’s the justice?!?

Her husband was a public servant grossing about $50,000 per year. She made $250,000 per year. In the divorce, assets were split down the middle: because he had less to his name, he took the house and about $200,000 of her retirement. Under the support laws, he was also entitled to spousal support to maintain a standard of living while the divorce was finalized. He wouldn’t consent to the divorce – his attorney advised him not to consent because he could collect spousal support until the two-year separation period lapsed, at which time Dr. Anderson could get the divorce without his consent. (Aren’t attorneys just the worst?) [PoF: Yes.]

The spousal support calculation – which took the difference between her net income and his, multiplied it by 40%,* and spit out the amount she had to pay until the divorce would be finalized in about two years – meant she owed her former husband $4,655.28 per month for the next 23 months. For those of you who forgot your calculators, that’s $107,071.44!

Dr. Anderson presented her case well. She had detailed records of finances for the duration of their marriage. All 10 years since med school, meticulously recorded, graphed, and thoroughly explained to the court. If the goal of spousal support was to maintain a standard of living, why would she pay more per month than either of the two had ever spent alone? He would now have his own net income – which was already greater than his solo spending and only about 1/5 lower than their combined spending – plus her support of $4,655.28 per month to “maintain his standard of living.

The court ignored it all.

What gives?

I’m a divorce attorney. I have seen this scenario play out dozens of times. There are two variations to the same problem that plagues the obligors in support matters all over the country: The parties always think the law will customize itself to their needs.

The two variations are simple and seem logical on their face. One the one hand, you have low-income earners (or high spenders) who come to the court requesting an adjustment to their spousal or child support because they “can’t afford it.” They have rent, a car payment, and utility bills to take care of – how can they afford to pay their ex on top of that?

On the other (far less common) hand, you have divorced couples who did not spend a lot of money compared to their high incomes. These high earners, like Dr. Anderson, wish they could just pay support in an amount that actually reflected the standard of living that, by getting married, they agreed to help the other sustain in the event of divorce.

But both cases are treated just like the typical case. It’s the best and worst thing about living in the Land of the Free: the same laws apply to all parties. The problem is, in the typical case – the type the support laws were written for – the parties spent nearly all that they earned.

There is, unfortunately, no exception in the law for financial independence blog-readers.**

Assumptions are the problem.

Assuming that the parties spent nearly all they earned, the spousal support calculation might make sense. Dr. Anderson and her high-income would suddenly disappear from her husband’s life, and he might be stranded with a high car payment, mortgage payment, bills, etc., and need time to refinance/sell/downsize various investments or replace items like furniture that went with Dr. Anderson. The spousal support would help him get back on his feet, ensuring that both parties to the marriage could get on with their lives.

But in a financial independence setting, Dr. Anderson is right to question the need for this type of support. Her husband doesn’t need help getting back on his feet; on the contrary, he has more assets than he did during the marriage and he has an income sufficient to provide for pretty much the same lifestyle without her help. What can she do?

Frankly, she has two options, and neither is easy.

First, Dr. Anderson could consider appealing the decision of the court, making the case to her state’s court of appeals that the law was applied incorrectly and/or is simply wrong and should be amended to account for financial independence-seekers. This might work, but the road is long, hard, expensive, and (at least in my opinion based on admittedly limited knowledge of where support laws will go in the future – I’m a lawyer, not a fortune-teller) incredibly unlikely to result in any change for her.

Second, Dr. Anderson can invent a time machine.

Enter the Prenuptial Agreement

She needs a prenup. I’ve been saying it a lot lately, but it’s because I so very strongly believe it: prenuptial agreements are absolutely crucial for the FIRE community.

Not the type of prenup that says: “If we divorce, you get nothing, and by the way we have sex at least twice per week (three times where a week contains a federal holiday),” but, rather, the type of prenup that sets reasonable boundaries for things like spousal support, alimony, and the division of assets such that both parties can move on relatively unharmed in the event that they don’t live happily ever after.

In other words, a prenup that results from an equal bargaining position and the good intentions of a couple in love – not a celebrity prenup or a genius-billionaire-playboy-philanthropist prenup.***

Dr. Anderson would have benefitted tremendously from a prenuptial agreement that superseded her state’s one-size-fits-all support laws. She and her husband could have agreed to anything: a reasonable support payment based on historical spending, an alimony payment based on helping her husband reach some minimum passive income goal and nothing more, or some particular dollar amount adjusted for inflation over the years, for example, rather than relying on state law to determine what would happen.

Dr. Anderson could have ended up paying a much more reasonable amount – or avoiding spousal support altogether – had she negotiated an agreement based on her circumstances in advance. Instead, she’s making a heartbreaking court appearance to challenge well-established law that some scumbag divorce attorney brought to her husband’s attention. And wishing she had a DeLorean and a flux capacitor.

* This is the actual support calculation in Pennsylvania to determine the “guideline amount” of support where there are no children involved. With children, it’s 30%. There is some room for adjustment of the guideline amount based on child support, other support obligations, and factors such as health insurance provided by one party to the other. There is also room for deviation from the guideline amount based on many factors like a party’s other household income, substantial assets, or just plain fairness. But generally, the guideline amount – plus or minus 10-20% – is used. So while it’s not inevitable, this is an extremely realistic scenario!

** Well, in Pennsylvania. I cannot speak to the rest of the country, but I sincerely doubt that the FIRE crowd has had a substantial impact on any state’s laws. It’s the problem with being so damn frugal; our discount lobbyists are the worst.

*** That being said, early Tony Stark, circa the first Iron Man movie, is kind of a personal hero of mine.

[PoF: Interesting, isn’t it? Expect the law to allow false assumptions to trump actual spending records. The best answer is to stay happily married for ever after, but as The Vigilante and many of you know, that isn’t always possible.

Republished with the permission of Physician on FIRE.

16 replies on “She Said, He Fled. Divorce in a FIRE Focused Family”

Though I understand and agree that this would be frustrating. I think one could argue that part of the prior standard of living was saving for FIRE.

Exactly. He’s not obligated to spend the money, but should be given a chance to live at the same standard with their prior savings rate. I’m confused, this seems pretty fair.

Thanks for your comments. I get the confusion, but I think a key factor is being forgotten: There is still an opportunity for distribution of assets, as well. See my reply to Ms. Steward’s comment!

Also, is there a cut-off point in your mind for when the husband in this scenario would have to start earning his own money to save for FIRE? Or does Dr. Anderson have to support him for life? A bit of a tongue-in-cheek question, but I honestly can’t tell from the way you phrased it. Personally, I don’t see why Dr. Anderson should need to support him beyond (A) the end of litigation, (B) whatever she needs to pay for the support of any children, and (C) whatever payments she needs to make to make the distribution of assets reach a reasonable level. The old “standard of living” justification for alimony has a rare place, but most of the time it just seems silly to me.

My divorce was absolutely brutal, easily lost 7 figures which I chronicled in my “I made every mistake” series on my blog (for those interested it spans mistakes part IVa-IVb)

Being a male and a high earner, I felt targeted by opposing counsel as well as from the judge and got hit with a lot of awful things I had to deal with.

A prenup would not have helped (it was an arranged marriage) and I got married right before I started making “the big bucks” as an attending physician so I really had no assets to speak of.

But yes, a divorce is the biggest threat in the path to FIRE (this Sunday I am featuring a new series of Divorce and Fire) with other divorcees sharing their stories.

Interestingly, I recently saw an attorney make a mistake in an offer where he assumed the husband would be making a lump-sum payment to the wife as part of distribution. The offer was supposed to be a payment from wife to husband since she’s leaving with higher income and much bigger assets, but I guess stereotypes took over in his mind for a second.

“Some scumbag divorce attorney brought to her husband’s attention” — in other words, the attorney did his/her job. I’m not saying the result was just, but take issue with the characterization of the attorney whose job is zealous advocacy for the client. The “scumbag attorney” trope is overused, in my opinion.

I understand the point about pre-nups and it definitely is 100% a good idea if you know you’re pursuing FIRE to get one.

I do admit to feeling somewhat baffled why this is a horrible scenario, though. The lower-earner’s lifestyle included FI, and they may have done a lot of the unpaid work that makes it happen. Pursuing FI on 50k a year is a very different timeline than on 5 times that. So it seems to me that giving the lower-earner a period of adjustment to figure out how their FI goal looks with the big money out of the picture does not seem unrealistic.

Am I missing something?

The lower income earner’s lifestyle certainly includes savings, but divorces also typically involve a division of assets. In a state like Pennsylvania, where I practice, the lower income earner in a situation like this has a good chance of receiving more than 50% of the marital estate, so it seems a little nonsensical to also throw spousal support at that person in a situation where he or she clearly does not need it. Many parties delay divorce as a way to collect additional spousal support before taking that large distribution, giving them a serious leg-up on the higher income earner going forward.

That said, the point of this post isn’t to say that our spousal support laws are inherently flawed, even though they may be for some circumstances: The purpose is to highlight the way it really works, since a lot of people reading FIRE blogs seem to assume that the law will be more tailored to their expectations than it really will!

If the husband only made $50k a year. With the spousal support, he makes that much per year without working after the divorce.

There we go, he achieved FIRE just by getting a divorce.

What if Dr. Anderson quit her job or lost her job? What then? Does she still have to pay?

I don’t know the specifics relating to states other than Pennsylvania, but I believe it is common to review whether it is a voluntary or involuntary job loss, and also to account for an “earning capacity,” as Pennsylvania does, in such a scenario. In other words, if she tries to avoid support by taking a job that pays only $100,000 instead, the court very well may say she is still obligated to pay as though she earns $250,000. On the other hand, if she loses the job through no fault of her own – such as where she becomes disabled – her support will likely go down or maybe even start going the other way.

I agree with the previous comments that the budget the two had together included FI. It sounds as if this was a shared goal and this is part of what the money was being “spent” on–this is the same as if the money was being spent on a car payment, a house payment, etc–just a different goal and way of spending the money. Saving for FI was part of the lifestyle.

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