My husband and I got married 10 years ago. For both of them it was a second marriage. I recently discovered that after five years of marriage he placed all of our assets in trusts controlled by him alone. At that time, at his request, I also gave up a job that I passionately loved in order to provide a stable home for his youngest daughter. He also has three other children who had already launched.
Instead of having a high-level job with bonuses and recognition, I was running one of his companies for no pay. I also drove her daughter’s carpool, allowed her adult son and her son’s children to move in with us, and ran our home smoothly and efficiently. I acted as a good steward of her assets so that she could maximize her retirement and investments. I have also added substantial assets to our portfolio with my real estate investing “hobby.”
I’m a team player and thought that once we retired we would live the life we dreamed of during the early days of our marriage – I expected he would retire at 65 and we would travel the world. Our wallet is worth 10 times what it was when we got married. His retirement account and several IRAs were opened after our marriage.
Irrevocable trust for his children
He put everything, even our house and my real estate investments, into a trust, with his friend as trustee. I had been the beneficiary of his retirement account, but now the trust is. I believe this change of beneficiary was falsified. He has invested in a company that can earn a lot of money and the investment has been placed in an irrevocable trust fund just for his children. Her children left their jobs to create startups with their father’s funding. At 69 he feels he cannot retire because he is helping his children.
I told him that if I survived, I would give everything I inherited from him to his children, and my assets would go to my family. When he was confronted about his trusts, he said that he thought I would agree because of my promise to gift his assets to his children. I’m not even a 50% beneficiary. I’m terrified that his kids will kick me out of the house or declare me incompetent when I’m a little old lady just trying to sit on the beach. I don’t even have children of my own to take care of me.
He can’t understand why I’m angry. Now I’m approaching retirement age with no additional investments in my retirement account, no credit for the work I’ve done, and no say in my assets. I don’t even have a work history in the last 10 years and I can’t find a job. Is it legal? If I call a lawyer, I’ll ruin the wedding. I can’t even contest the will because it states that if anyone contests the will, they will get nothing.
With most things, I’m smart. But damn, I was so stupid. What are my options?
Second class wife
“Transparency is key to marital estate planning.”
MarketWatch illustration
Dear ex-wife,
Secret trusts and possible falsification do not constitute a healthy marriage.
There is nothing to prevent a spouse from setting up a trust during the marriage, but they should do so with separate assets. Setting up a trust with separate assets without telling your spouse is bad manners, but setting up a trust with separate and marital assets, in secret, is a recipe for a legal battle and divorce court. Marital assets are those accumulated during the marriage.
Sometimes in life, you have to make a choice: You can back down and allow your husband to set aside marital property and thus “save” your marriage on paper, even if he has broken your trust in him and the marriage. Or you can call a lawyer and perhaps a forensic accountant to examine the contents of the trust and trace its origins, thus putting your marriage at risk.
“Although there are legitimate reasons for a spouse to establish a trust during the marriage, sometimes this is done to improperly protect assets from equitable distribution,” according to Jewell Law PLLC of New York. “Often, the non-beneficiary spouse is unaware of the trust or thinks the money is coming from another source, such as a family member.”
Transparency is key in marital estate planning. “A trust established in the name of one spouse may be considered separate property regardless of whether it is established before or after the marriage,” the law firm adds. “However, when created during a marriage, the non-beneficiary spouse must raise the question of whether marital assets have been placed in the trust.”
“This is a situation where a prenuptial agreement could have been helpful in confirming – and protecting – the rights of each spouse in the event of divorce or death,” says Neil V. Carbone, partner at Farrell Fritz, P.C. “State law governs i inheritance rights of the spouse. Most states provide the surviving spouse with a minimum “elective” share, which is the right to take a share of the deceased spouse’s estate regardless of what a will or revocable lifetime trust agreement provides.
“The idea of the elective share is to avoid complete disinheritance of the surviving spouse, so ‘no contest’ clauses are ineffective in rejecting the request for an elective share,” he adds. “What goes into the elective action ‘plate’ will vary from state to state. For example, in New York, life insurance is not included in determining the optional portion. Some people may seek to defeat a spouse’s elective share rights by transferring property to an irrevocable trust, but they generally must survive a cooling-off period for the transferred property to be excluded.
Potential forgery
Some retirement plans require your spouse to be the primary beneficiary. If your husband changed the beneficiary of a qualified retirement plan without your consent, this should be contested. Other retirement plans, such as IRAs, do not have the same spousal consent requirements. You can read more about plans covered by the Retirement Equity Act here.
Many people are surprised to learn that 401(k)s and IRAs are treated differently,” Carbone says. The former are governed by the Employee Retirement Income Security Act of 1974, and typically, a spouse must agree in writing for someone else to be named as a beneficiary, she adds. “IRAs are not governed by ERISA, and spousal consent is not required to designate a non-spouse as a beneficiary.” If your husband forged your consent on a 401(k) beneficiary designation form, you should take action as soon as possible.
As you process this information, I have other questions to ponder: What are you holding on to? The illusion of a happy marriage? The promise of financial security, even as it seems increasingly unlikely? The damage to your marriage has already been done by your husband. By hiring a lawyer after acquiescing to his demands for so many years, you would only be eliminating the consequences of his actions.
One last tip: If you’re thinking about getting a divorce, you’re better off waiting until your 10th wedding anniversary. After that date, you will be able to receive Social Security benefits for your spouse. If during your marriage she earned more than you, you are entitled to a maximum of 50% of your husband’s full pension.
You have given up a lot for your husband. Yes, you did it voluntarily, but you contributed your time and financial expertise to your husband’s business, and any right-thinking divorce court would hardly look kindly on your husband’s actions. Not all stepmothers keep their promise to distribute assets to their deceased spouse’s children, but this is no excuse for his actions.
In addition to forgery and financial shenanigans, you can add gaslighting to the list of his misdeeds.
You can email The Moneyist with any financial and ethical questions at qfottrell@marketwatch.com and follow Quentin Fottrell on X, the platform formerly known as Twitter.
The Moneyist regrets that it cannot answer questions individually.
Previous articles by Quentin Fottrell:
I have $1.5 million in stocks and bonds. I asked my broker to convert my bonds into cash. He didn’t and my portfolio dropped by $100,000. Can I sue?
‘She was very special to me’: My 98-year-old cousin was targeted by scammers. They stole $800,000. Do I have any recourse?
‘It was a mistake’: My father set up a revocable trust, leaving everything to my stepmother. He is shutting me out completely. What can I do?
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