Dividing Assets for Older Couples in Divorce

Gray Divorces

WIthin the past few years, the divorce rate curve seems to have flattened, except for older couples. Today, older people are divorcing at higher rates than many other age groups. These divorces are more common due to a number of factors, including women being more financially independent, longer life expectancy and changes in societal attitudes toward divorce.

Terminating a marriage when someone is 50 or older is much different than getting a divorce when younger. While the emotional impact is often significant because of the long-term reliance on the marriage, the financial aspects of divorce later in life can be life-changing and have a stream of consequences.

Dividing Property
Principles

Most states are equitable distribution states. These states do not require an equal 50/50 split but instead look at what is fair or equitable under the circumstances. A number of states use community property principles, which assume that all income and property acquired during the marriage is the equal property of both spouses. Assets are divided equally between the parties. Because older people have had longer to accumulate assets, dividing them may be more difficult. The parties are able to reach their own agreement regarding their property to avoid litigating the issue. However, older couples may have more financial issues and concerns than younger couples.

Spousal Support

In many states, temporary spousal support may provide financial support to the lower-earning spouse so that he or she can acquire some additional job skills or education. Individuals who have been in a long-term marriage, often considered as being ten or more years of marriage, spousal support may be more likely to be ordered. Sometimes, spousal support may be ordered for life when older couples are involved. However, often spousal support ceases when a person retires, so it is important for the spouses to have a realistic expectation of spousal support obligations and the duration of anticipated payments.

Retirement Accounts

One of the most significant effects of later in life divorce is that retirement accounts may be divided when there is not much time to recuperate the funds. Therefore, the retirement funds that would have sufficed to support one household are splintered to support two. Some individuals may decide to hand over a portion of his or her pension in order to avoid making spousal support payments. However, there can be negative tax implications with this route, so parties should ensure that they are well informed of their rights and the consequences before entering into an agreement of this nature.

In many cases, the couple will need a Qualified Domestic Relations Order, which is a completely separate court order that is used to divide retirement benefits. These orders provide the holder of the retirement plan with the authority to divide the account. Couples should discuss possible provisions that can be included in an order of this nature with their legal counsel, such as when the spouse can receive distributions while avoiding tax penalties.

Marital Home

Another important consideration is whether one spouse will keep the marital home or if the couple will sell the home and split the proceeds. It may make sense for one of the spouses to keep the home so that they can qualify for real estate property tax exemptions and have built-in housing so that they have lower expenses going into retirement. Some spouses may want to qualify for a reverse mortgage. Spouses who stay in the home may be able to qualify for public benefits still, such as Medicaid. The spouse will also have equity in case he or she decides to sell the home in the future. However, it can be difficult for the other spouse to find alternative living arrangements.

If one spouse keeps the home, he or she may have to give up property rights to other assets, perhaps including spousal support or a stake in a retirement account. Additionally, the spouse retaining the home is still saddled with certain expenses, including maintenance, insurance and property taxes, which may be difficult to pay if only relying on a fixed income.
Provided by HG.org

Disclaimer: Every effort has been made to ensure the accuracy of this publication at the time it was written. It is not intended to provide legal advice or suggest a guaranteed outcome as individual situations will differ and the law may have changed since publication. Readers considering legal action should consult with an experienced lawyer to understand current laws and.how they may affect a case.

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