Divorce in couples over the age of 50 has skyrocketed. In fact, it’s increased at such a significant rate, it is now known as “grey divorce.” With grey divorces come many unique issues that must be carefully considered.
Jeffrey N. Greenblatt, Family Lawyer
When couples divorce later in life, they have fewer years left and fewer opportunities to make up for the financial losses often associated with divorce. Some may opt to stay in the workforce longer. Many will be forced to reenter the job market late in life. For economically secure adults who are healthy, a divorce may have minimal negative consequences and actually can be empowering, at least for the initiator of the divorce.
But for older adults, divorce brings the realization that their carefully nurtured nest egg will have to be divided, between them, and this can be difficult. Furthermore, expenses will increase when each has to pay for their own health insurance, housing, and everyday expenses like utilities and auto insurance. The cost burden can become unnerving.
So, when your client is considering divorce later in life, where do you begin?
First, start with a list of necessary and discretionary living expenses and financial considerations. Estimate how much income is needed — and consider some of the factors that could save additional heartbreak.
Tax Liability: What to Consider
Make sure that tax issues are reviewed prior to finalizing a Separation Agreement so that neither spouse ends up with a tax bill that could have been reduced or avoided. To split retirement assets, a divorcing couple will need a Qualified Domestic Relations Order (QDRO) designed to accomplish the division of these assets and to insure a tax-free transfer.
Retirement Savings
Spouses in a “grey divorce” have less working years left to contribute to retirement accounts. It doesn’t matter if one spouse was considered at-fault for the divorce; retirement funds and other assets are likely to be split evenly. Typically, part of a pension or 401(k) is divided between the two people. If you’re not yet 59 ½, you can roll that money into another retirement product without penalty. Early withdrawals from retirement funds can result in penalties and fees, so one or both spouses may have to delay their retirement and ultimately adjust their standard of living.
Who Wants the House?
Both spouses often stress about giving up their marital residence. It can be emotional, especially if it were a longtime home. It’s one of the areas where poor financial decisions are made. However, it’s one that makes the most financial sense, particularly when courts often split assets evenly. The house has value and something else must be given to balance that out. Perhaps a greater share of the pension or a smaller alimony obligation. Either way, houses come with property taxes, maintenance expenses, taxes and insurance, and other costs that can stretch already stressed financial resources. So each partner needs to evaluate the standard of living he or she can afford based on individual earnings.
Health Insurance
COBRA insurance is usually available through an ex-spouse’s employer for about three years after a divorce, which can be a helpful option while transitioning to an individual policy, but it is usually fairly expensive. Move to an individual policy as soon as possible following the date of divorce.
Spousal Support/Alimony
Alimony is usually part of the divorce picture in grey divorces because couples are more likely to have been married more than 10 years. However, it’s not guaranteed. Spousal support/alimony provides a spouse with periodic payments from the former spouse that continues after the divorce. Spousal support is not automatically ordered and sometimes some spouses may offer more of their pension to avoid making alimony payments. However, it may not be a person’s best interest to accept a deal that would trade tax-favored investments for potentially taxable income.
Social Security
If a marriage lasted 10 years or more, individuals may be eligible to receive social security benefits from their ex, even if he or she remarries, under certain conditions. Obtain the most recent Social Security statement during the divorce process to get an idea of what that benefit will be. Some qualifications for benefits include a marriage that lasted 10 years or longer and a divorce of at least two years; no remarriage; age 62 or older; and ineligible for an equal or higher benefit.
Estate Planning
During a lengthy marriage, insurance policies are typically acquired and a will or power of attorney is drafted that benefits the other spouse, or that names the other spouse as an executor. Before filing for divorce, these issues should be examined to determine if changes should be made sooner rather than later. Estate planning can be a relevant part of a property settlement agreement.
Financial Survival After Divorce
Health insurance coverage is one of the biggest concerns and biggest budget items for those 50+ years of age. Projecting accurate living expenses and accepting that a lifestyle change might be needed is essential. Some people find they need to return to the workplace or work longer than anticipated.
Couples will want to revise estate plans, wills, and change insurance beneficiaries. Wills should be in compliance with the applicable provisions in the Separation Agreement. Also, any debts obtained in the name of both spouses before a divorce remain the obligations of both parties after a divorce, no matter what a divorce decree says.
Divorce at any age is difficult, but divorce over 50 comes with many more issues that must be considered. Counseling clients to protect their financial future is of the utmost importance as they look towards retirement and this new phase in their lives.
Jeffrey N. Greenblatt is a renowned family law attorney with more than 40 years of experience. Jeff represents clients in matters including prenuptial agreements, divorce, alimony, child custody, visitation and support, complex marital property division, and domestic violence. He has a reputation as a highly skilled advocate, sympathetic and compassionate listener, and powerful guardian of his clients’ rights. www.jgllaw.com/
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