My husband and I have been married for 10 years. It was a second marriage for both of us. I recently discovered that after five years of marriage, he has placed all of our assets in trusts controlled solely by him. At that time, at his request, I also gave up my job that I dearly loved so that we could create a stable home for his youngest daughter. He also has three other children already divorced.
Instead of getting a high-profile job with rewards and accolades, I ran one of his companies without pay. I also drove his daughter's car, allowed his adult son and his children to move in with us, and ran our household in a smooth and efficient manner. You have served as a good steward of his assets so that he can maximize his retirement and investments. I have also added significant assets to our investment portfolio through my “hobby” of real estate investing.
I am a team player and I thought that upon retirement we would live the life we dreamed of during the early days of our marriage – I figured he would retire at 65 and we would travel the world. Our portfolio is worth 10 times what it was when we got married. His retirement account and several IRAs were opened after our marriage.
An irrevocable trust for his children
He put everything, even our house and investment properties, into a trust, with his friend as trustee. I was the beneficiary of his retirement account, but now the trust is the beneficiary. I think this change of beneficiary was fraudulent. He invested in a company that would make a lot of money, and this investment was placed in an irrevocable trust solely for his children. His sons have quit their jobs to create startups funded by their father. At 69 years old, he feels he cannot retire because he is helping his children.
I told him that if I outlived him, I would give everything I inherited from him to his children, and my assets would go to my family. When confronted about the trusts, he said he assumed I would agree to it because of my promise to give his assets to his children. I'm not even a 50% beneficiary. I'm terrified that my kids will kick me out of my house or declare me incompetent when I'm a little old lady trying to sit on the beach. I don't even have children to take care of me.
He can't understand why I'm upset. I am now close to retirement with no additional investments in my retirement account, no credit for the work I have done and no say in my assets. I don't even have a work history for the past 10 years and I can't get a job. Is this even legal? If you bring a lawyer, it will ruin the marriage. I can't even contest the will because it says that if anyone contests the will, they won't get anything.
In most things, I'm smart. But oh my god, I was so stupid. What are my options?
Second-class wife
“Transparency is key to marital estate planning.”
Market watch illustration
Dear ex-wife,
Secret credits and possible fraud do not make for a healthy marriage.
There is nothing preventing one spouse from establishing a trust during the marriage, but they must do so with separate assets. Setting up a trust with separate assets without telling your spouse is a bad idea, but setting up a trust with separate assets and marital assets, secretly, 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 step back and let your husband dispose of marital property and thus “save” your marriage on paper—even though he has broken your trust in him and the marriage. Or you could contact an attorney and perhaps a forensic accountant to examine the contents of the trust and trace its origins, thus risking your marriage.
“Although there are legitimate reasons for a spouse to establish a trust during a marriage, it is sometimes done in order to improperly protect assets from equitable distribution,” according to Jewel Law PLC in New York. “Often, the non-beneficiary spouse is not aware of the trust or believes the funds came from another source, such as a family member.”
Transparency is key to marital estate planning. “A trust created in the name of one spouse can be considered separate property regardless of whether it was created before or after the marriage,” the law firm adds. “However, when it is created during the marriage, the non-beneficiary spouse must raise the issue of whether any marital assets have been placed in the trust.”
“This is a situation where a prenuptial agreement would have been helpful in confirming—and protecting—the rights of each spouse in the event of divorce or death,” says Neil Fee. Carbone, Partner at Farrell Fritz, P.C. “State law regulates a spouse's inheritance rights. Most states provide the surviving spouse with a minimum “elective” share, that is, the right to a share of the deceased spouse's estate regardless of what the will or Revocable Lifetime Trust Agreement.
“The idea of the elective share is to avoid complete disenfranchisement for the surviving spouse, so non-compete clauses are ineffective in overcoming the demand for the elective share,” he adds. “What goes into the elective stock 'pot' will vary from state to state. For example, in New York, life insurance is not included in determining the elective share. Some people may seek to eliminate a spouse's elective stock rights by transferring the property into a trust.” Credit is irrevocable, but they generally must survive a look-back period until the transferred property is disqualified.
Possible forgery
Some retirement plans require a spouse to be the primary beneficiary. If your spouse changes the beneficiary in a qualified retirement plan without your consent, it must be appealed. Other retirement plans, such as an IRA, do not carry the same spousal approval requirements. You can read more about what plans are covered by the Retirement Rights Act here.
“Many people are surprised to learn that 401(k)s and IRAs are treated differently,” Carbone says. The former is subject to the Employee Retirement Income Security Act of 1974, and typically, the spouse must agree in writing to name someone else as a beneficiary, he adds. “IRA accounts are not subject to ERISA and spousal consent is not required to designate someone other than the spouse as beneficiary.” If your spouse forges your consent on a 401(k) beneficiary designation form, you must act as quickly as possible.
While you're processing this information, I have other questions for you to consider: What are you holding on to? The illusion of a happy marriage? The promise of financial security, even though this seems increasingly unlikely? The damage to your marriage has already been done by your spouse. By hiring a lawyer after many years of acquiescing to his requests, you are only cleaning up the ramifications of his actions.
Final tip: If you are thinking about divorce, it is best to wait until your tenth wedding anniversary. After this date, you will be able to receive Social Security benefits for your spouse. If he earned more than you during your marriage, you are entitled to a maximum of 50% of your spouse's full retirement benefit.
You have given up so much for your husband. Yes, you did so willingly, but you contributed your time and financial expertise to your husband's business, and any right-thinking divorce court is unlikely to look at your husband's actions. Not all stepmothers keep their promise to distribute assets to their late husband's children, but that is no excuse for his actions.
In addition to forgery and financial deception, you can add gaslighting to his list of sins.
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 he cannot respond to questions individually.
Previous columns by Quentin Fottrell:
I have $1.5 million in stocks and bonds. I have 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 late 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 and left everything to my stepmother. It completely cuts me off. what can i do?
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