While the divorce rate has declined in the population as a whole, the rate has more than doubled for people over the age of fifty between 1990 and 2010. Baby boomers who are facing a divorce after years of being married are on the rise, and the phrase ‘gray divorce’ has been coined to describe this recent phenomenon. Whether you are seeking a divorce after 30, 40, or 50 years or marriage, a divorce after age 50 is different than a divorce in your 30s or 40s.
What is a Gray Divorce in Arizona?
A gray divorce is one in which both of the parties are over the age of 50. As we stated earlier, these types of divorces are becoming more prevalent because a significant percent of the US population is aging. While the process of the dissolution of a gray marriage is the same as the process of any other marriage, coming to a settlement agreement can be much more challenging because each party in the divorce wants to protect themselves during the divorce and safeguard their financial future so that they are able to live comfortably in their later years. There is no denying the fact that splitting will get harder with age both financially and emotionally. Not only must you separate your emotions from the division of assets, you must also worry about unique financial repercussions that may not even present themselves in other cases. Here are some of the reasons why divorce over 50 can be harder on both parties:
Your Income Has Diminished
Dividing assets is part of divorce proceedings, but this division can create unique problems for one or both partners. In your senior years, your ability to generate an income is either gone or it has diminished. When the income has stopped or slowed, splitting assets and fixed income can affect each party more than it would if you were still of working age. By divorcing during a time where you are seriously relying on your fixed assets, savings and Social Security, you are at-risk of not having enough money left to cover your bills and live the life you are accustomed to.
Your Tax Filing Status Will Change
Many people wait to borrow against their retirement funds so that they are in a lower tax bracket when they are penalized. This is a strategy that is often recommended by financial advisers. These advisers do not consider what the repercussions will be if you go from a married filing status to a single filing status. Juggling your taxes can be difficult in your senior years as a single individual because you will be in a higher tax bracket even at your lower income level. You are also at risk of owing taxes on your retirement accounts when they are transferred from one to the other after assets are divided. Our family law firm can formulate divorce orders in a way that can help minimize tax repercussions or attempt to avoid them entirely, if possible. We are not tax attorneys and you may need to seek the counsel of a tax attorney.
How to Protect Your Finances When You Are Going Through a Late-in-life Divorce
Now that you understand the unique challenges you will face, it is important to learn how to avoid financial errors so that you do not have to worry about recouping from them. Here are some valuable tips to get protective of your finances so that you can still live comfortably once you are single:
Keep Cool When Discussing Marital Assets
When you get married, everything about your love for the other. When you get divorced, it is a business transaction that is all about money. If you let your emotions come into play, it can be very difficult to divide your assets objectively. It is easier said than done, but you need to view the divorce as a business deal instead of having the emotionally charged arguments that will cost you time and money. Discuss splitting your assets calmly and remember that staying calm will actually keep more in your pockets. Starting over after a divorce at 50 isn’t easy but a fair financial settlement will go along way in getting you back on your feet.
Review Your Individual Debt and Your Shared Debt
You never want to be surprised by debt that is not in your name, especially if there are community property laws in your state. It is important to run credit reports on you and your spouse before you file so that you can list your debt as a couple and debt that was accrued by your spouse. The last thing that you want is a surprise as you are negotiating who will be responsible for specific debt.
Analyze Marital Assets and Retirement Accounts
You need to consider what type of settlement will be most beneficial to you when you are negotiating. Some believe that offering a lump sum payment to the other spouse in an amount which will be less than the long-term value of the assets is wise. It can also be beneficial to transfer assets into a trust for the family or into a life estate.
If you have a shared house, consider how much financial sense it would make to keep it. Typically, selling the home is the best choice because it costs to maintain and does not have a guaranteed future value. If you have retirement accounts together, be sure to discuss with your attorney the need for Qualified Domestic Relations Orders (QDRO) to avoid tax penalties.
Think About the Effects on Your Children
As you have aged, you have probably discussed your estate and how assets will be gifted. A divorce can affect this estate plan and the generations to come. You need to consider how your divorce can affect adult children emotionally and financially. You should also give your children expectations on how their inheritance could change.
Do Not Overlook The Importance of Health Care
With older age comes medical issues, and you should have health insurance to protect your assets if you need medical care because an illness can affect your financial future. When you are coming to a settlement, remember important issues like long-term care and whether a Legal Separation instead of Divorce is the right path to take. A divorced person cannot typically keep a former spouse on their insurance after the divorce is granted, whereas the health insurance coverage can remain the same if the couple decides to legally separate vs. divorce.
Divorce and Social Security
If your marriage has lasted more than 10 years and the other spouse is over 62, they are entitled to receive spouse benefits as long as they are unmarried at the time. Keep this benefit in mind when reaching an agreement.
The reason for divorce can vary but inevitably both parties will fight for the money. A divorce can weaken your financial security if you do not consider the challenges of separating assets. Make sure that you avoid the financial errors that you will not have time to recover from and safeguard your financial future. If you would like to speak with a divorce and family law attorney about your specific case, give us a call for a free consultation, we can be reached 24 hours a day at (602) 254-8880 or by using our confidential email form.