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My wife of 18 years has a problem with money. She has stolen from banks using my identity, falsified documents to get cars, and has been to prison over it. I pay for everything and give her whatever I have left over, which is very little.

We have three children approaching the teenage years. Despite being through the worst possible time with her, we are still together. Recently she was in a serious car accident and is due to receive a big injury payout. She says she is "planning" on paying me back everything that she took from me (I'm still paying back a couple of banks where she jointly took out loans). She's also planning on getting a new car and doing a few things around the house.

I'm the breadwinner which is why I pay the bills and mortgage. She works part time but it doesn't go very far and despite receiving a good part time wage, she is broke after two weeks.

I need to be realistic and live life thinking there could be three outcomes after her insurance payout:

  1. She makes excuses and lives the high life, spending the money on a new car, big house renovation, expensive holidays and her rehab.

  2. She pays back everything and buys a 5 year old auto and also does the few things around the house, a small holiday, and keeps money for her rehab/ rainy day fund.

  3. She buys me out of the mortgage and we divorce.

I think option 1 and 3 are very realistic and option 2 is never going to happen. Option 2 is what I'd like to happen since it would be nice to be together as a family without her past issues always being at the back of my mind.

How do I make sure option 1 does not materialize and if option 3 happens, how can I get the best deal for myself so I can provide a roof over my head and have a place for my kids to visit?

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    This may be more of a Law or IPS question than Personal Finance question. It would help to know the state. Depending on how much you value the money versus the relationship, you might want to look into whether you can get some sort of legal proceeding (court order, lien, etc.) to stake a claim on the settlement. You could see whether she's willing to sign over the settlement to you in such a way that the money never goes to her. – Acccumulation Nov 2 '18 at 23:07
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    I'm getting out of my realm here and I hope this isn't offensive, but I'm a little surprised that if option 3 occurs, you automatically assume your kids would live with your wife who has been to prison and still currently has addiction problems. It that's true, I feel like #3 isn't a good option. – TTT Nov 3 '18 at 15:17
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    Does your wife recognize she has a problem, and has she expressed a desire to change? Does she want to remain in the marriage? Is she willing to get help/counseling? – Ben Miller Nov 3 '18 at 15:41
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    Very sadly, EVERY addicted person "wants" to change. It's a non-issue. Of course everyone "wants" to be better. Very unfortunately, it amounts to nothing - a few stated sentences that they "want" to be better; and the usual few attempts at or assertions that they want to try a counsellor, therapist or the like. The simple bottom line is OP's "1" will happen, and OP has to choose whether or not to enact "3". – Fattie Nov 3 '18 at 16:57
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    Location is important here, as well as whether the payout is solely for injury/pain and suffering, or whether part of it is for loss of wages. If you live in a community property state and part of the payout is for loss of wages, then half of that part of the payout is yours. divorce.lovetoknow.com/… – shoover Dec 3 '18 at 18:34
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The unfortunate absolute facts are

  1. Lump sums are a huge particular problem1 2 for people with spending problems 3.

  2. People with spending problems burn through lump sums instantly.

  3. People with spending problems never change. It's impossible to fix the behavioral problem.4

As OP has already stated, OP's option 2 will not happen.

There are only two possibilities:

  1. Somehow legally keep all money away from a person with a spending problem. This is no different from keeping alcohol away from an alcoholic. If this is possible, do it.

  2. OP's option "3"

There are simply no other possibilities.

(Well, you can just let it happen and end in ruin.)

You can and should hire an addiction specialist for the person with the spending problem (it will achieve nothing, but it will "concretize" the problem.)

The only important factor is the children. It looks like the decision made at this time will affect whether they are in ruin financially or not as they go through their late teenage years.


Exactly as @accumulation said in a comment, "you might want to look into whether you can get some sort of legal proceeding (court order, lien, etc.) to stake a claim on the settlement".

It is inconceivable the spending-problem person will "give" you some back. Of course, they will (honestly, to themselves) "promise" that they will. But it will all be gone in days. Almost certainly, it will all be gone before it even arrives. This is the nature of the disease that is addiction.

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    I like the sentiment of this answer, and I think I could upvote it if you'd tone down the absolutes a bit. Especially with your 3rd point: Most people with spending problems don't change, but of course some do. – TTT Nov 3 '18 at 15:28
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    #3 of your absolutes is certainly not absolutely true. People with spending problems can change, and people do beat addictions. They need help, and they need to want to change, and it will be difficult, but it can happen. – Ben Miller Nov 3 '18 at 15:38
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    @Fattie That is probably the most likely outcome, but I have seen people completely turn their lives around for the better, with God’s help and the help of good counseling and accountability. – Ben Miller Nov 3 '18 at 17:07
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    "Most people with spending problems don't change, but of course some do." Of course. And of course OP has no choice but to plan as if his own loved one will not. – Beanluc Dec 4 '18 at 0:39
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    Nice references. But even your own link in #3 (reference #4), discusses effective treatment plans, which goes against your statements that these people can "never change" or that addiction counseling "will achieve nothing". – TTT Dec 7 '18 at 16:59
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+50

There is not a lot that you can do to force your wife to spend this money appropriately, but since divorce is one of the options on the table, it may be a good idea to contact a lawyer to write up a postnuptual agreement before the lump sum is paid. This allows your spouse to put the all of her good decisions in writing before the temptation to spend the money is there.

If you haven't worked with Debtors Anonymous, you might consider what they have to offer as well.

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If you try to keep too much money away from her, option 3 will happen because she will feel you are imposing on her. The best thing to do now is just keep it down to a normal level, what that is you can decide with her. If she does not conform to this I would cut things off, no matter how hard it is, so that not only do your kids have a place to visit, you have a roof over your head. I understand this is probably a really hard time for you, so I’m just suggesting. Good luck... (edit) If it really gets out of hand, you can call a lawyer, but it WOULD lead to a divorce. Weigh your options.

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Option 4 : Money seized by the Internal Revenue Service to pay off any outstanding debts you and her may owe from previous tax years.

Option 5: Since she was incarcerated, prison sentences also comes with paying fines, the lump sum could be seized to pay off any outstanding balance.

Option 6: The "lump sum" is another true story.

Option 7: hassle-free option.

Her insurance claim could be protected from creditors. That may include you also, if you live alone and your kids only visit you. You would owe her alimony and a divorce too.

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