Back in 2023, before you had your second child, your wife filled out divorce papers, so to some extent she's been aware of the divorce aspect for quite some time.
I will mention the custody and parenting aspects in my country. Most states seem to separate the legal custody aspect of a divorce as a somewhat separate category from the co-parenting schedule. Should you divorce, the "less bad" outcome would be for the reasonably normal parent to have as much authority during and after the divorce. (Not that the disordered parent would agree, of course.)
For example, your oldest child will soon be in school, if not already in preschool or daycare. The course of wisdom as the reasonably normal parent is to limit potential irrational chaos and obstruction in future years by seeking as much legal status and as possible from the very start of the legal process. If you try to appease by relinquishing custodial Decision Making to your possible ex, then it will almost certainly be exceedingly difficult to fix it later.
Since your spouse may move multiple times during or after a separation/divorce - as mine did - that may impact your employment or your own future life decisions. However, if you had some sort of "Residential Parent status for schooling" then your ex would be limited in how far away from you she could move with the children. (Yes, some members here had ex-spouses who purposely moved far away in order to limit their parenting time and options.)



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