People over the age of 50 are divorcing at a higher rate than ever seen before in the United States and this is called a “gray divorce.” When 2017 came to an end, there were 26,653 active divorce matters on file in Maricopa County. Baby Boomers are particularly hit with divorce alongside the advent of Facebook and other social media. The phrase “gray divorce” applies to people who are over 50 and a part of the recent phenomenon. No matter how long you were married, a divorce at 50 or after 50 is much different than a divorce as a younger person. Different challenges are facing you, including health care, social security, changing incomes and changing expenses. Not to be overlooked is the possibility that your adult children are affected by your divorce and one of you risks losing that relationship with your adult children. They may take sides, or blame one of you – after all, they are old enough to be aware of each parent’s failures in the marriage.
Overview of a Gray Divorce
If you’re both over 50, and you’re divorcing, you belong to the “gray divorce” population. We realize this is an irony for some readers, much like a 36 year old “geriatric pregnancy.” The gray divorce is becoming more common in part because so many people are living longer, staying healthier, and many people in the gray divorce population are afforded more options than their predecessors. The divorce itself doesn’t change in the legal sense, but there are three divorces:
Each person has significant emotion attached to this higher-stakes process. You have likely accumulated savings, assets, and maybe some well-strategized debts. There are some gray divorcees who maintain a mortgage, despite being able to afford to hold equity positions so that they can maintain a higher credit score if they want to purchase an investment.
The legal process hasn’t changed for your divorce, but every word of your dissolution documents matters that much more, because more is at stake. Also, more emotion is attached to each decision. After all, you’ve had some opportunities to develop some strong memories, opinions and even some resentments.
The emotional part of a gray divorce is so heightened because many people carry past hurts from one season of life into the next. This is true whether you are carrying hurts from earlier in this marriage, or hurts from a prior marriage, prior relationship or prior member of your immediate family. Everything feels stronger, and matters more. And your time is that much more precious now. It’s not that you have so little of it, but you have made the mistakes you don’t want to repeat.
You want to safeguard your assets and debts from the other person, and you recognize the threat that third party creditors can pose to your holdings as well. You have to be concerned about unique financial issues that don’t likely affect people in the under-40 population, like these:
Your Best Income Years Were In Your 30’s and 40’s, And Now Your Earning Power and Potential Are Reduced
Everyone going through a divorce or legal separation has to divide assets and debts. At this time in your life, your division can be affected by the reduced earning power you each hold. Your earning potential is also reduced. To divide assets and fixed income will affect you both more than if you could just go out and earn more money. Let’s face it – your desire and motivation to re-partner with someone new may be diminished as well. You especially may be very cautious around the sharing of finances. If you are unwilling to share finances, your new partner will probably respond in kind. You may attract a partner who is protective of children from a prior relationship. You may each want to protect your children from new, previously-unknown third parties. All of these dynamics compound as you collect more assets, people and experience. You may face living on social security or a fixed income.
Your Tax Status Changes – Filing Single & Borrowing Against Retirement Could Penalize You More
Borrowing against your retirement funds may be most advised when you are in a lower tax bracket at the time you incur a penalty. If you are now single at the time of this penalty, your tax implications can change. You could owe taxes on retirement accounts if they are transferred between you and your former spouse. This firm maintains close, dependable relationships with financial professionals to structure your divorce decree so that you incur the least disadvantageous consequences. But we always recommend you speak with your financial advisor, CPA or tax attorney to ensure that every step you take, or plan to take, will meet the goal of reducing your penalty.
Want some tips to move through this challenge?
Consider Collaborative Law
Other firms may tell you to maintain perspective, but we know that’s really hard to do. Unlike a lot of law firms, we offer collaborative law for gray divorcees. We also offer a roster of reliable, independent but like-minded professionals who will offer collaborative law to your spouse. Divorce is ultimately a financial transaction, but emotions cloud it. Keeping a cool head may be too much to ask. You may have some real hurts and challenges, and you want to air those grievances. Collaborative law allows you that opportunity. It also enables the two of you to create a uniform approach to telling your friends, your children, and your family members about your life change. You may lose each other as a spouse, but you can still be family. I mean this – and I know many people who actually successfully maintain these relationships.
Step Back and Look at Whose Debt is Whose
Obtain your spouse’s credit report, and be sure the debt in their name is your debt too. Arizona community property laws make every debt a community debt, but some people bring old debt into a marriage. There is a list of important documents you need to collect for your divorce. Contact us and we’ll give you the list.
Create a List of Marital Assets and Retirement Accounts
Even if the retirement account is in your spouse’s name, list it. You may be entitled to some funds from that account and that may be provided to you as an “offset.” Consider what is your best day financially. You may want a lump sum, or you may want long-term payments. If your spouse will flout court orders, I suggest looking at the best lump sum payout you can structure. Would it make sense to keep a house? What if your spouse lived in a home you own, paid rent, and had a “life estate” so that it transfers to you on death? Do you have shared retirement accounts? You may want a QDRO (Qualified Domestic Relations Order). If there is a government or other type of pension, these can be very tricky. Make sure the right attorney is handling your court order dividing a pension – it may not be a QDRO!
Would it Make Sense to Gift Your Kids?
If you have adult children who you both planned to gift, it may make sense to create a trust now to gift them, or structure a payout of the trust interest, to your children to avoid probate as you both age and to avoid third party greed. You will both move on, and third parties could become opportunistic if you have significant assets. Are you not able or willing to gift your kids now? Tell them how their inheritance could change.
Health Care Needs Will Change – And So Will Your Health Care Expenses
Medical issues present as we become older. Health insurance is important to avoid creditors attaching to your assets. Plan for your needs as you age, require assistance and medical care. Sometimes people consider a legal separation rather than a divorce due to health insurance expenses, and the risk of a lifetime spousal maintenance award that is associated with the rising costs of health care. Sometimes, health care providers will allow a legally separated couple to remain insured, but this is an individual determination on a case-by-case basis.
Social Security Income Comes Into Play
Were you married longer than 10 years? Is your spouse over 62? You can receive spousal benefits if you are unmarried.
A divorce can really threaten your financial security. Consider every out of court option. This isn’t the time to waste your life on lawyer’s fees and court appearances. However, if you must litigate your divorce, we have a tremendous experience structuring spousal maintenance positions in gray divorces.
Do you want to speak with a lawyer about your divorce? Call us at 480-999-0800.