The number of married couples divorcing after the age of 50 has been rising in recent years. In some ways, divorce later in life is simpler. The kids are grown so support and visitation are rarely issues. In other ways, ending a long-lasting divorce later in life presents challenges that require added consideration.
Divorce typically leaves both spouses in worse financial condition than while married. Creating a post-divorce financial plan becomes more critical when marriages end late in life. A full inventory of assets and their values must be made. Division of assets and debts should be decided based on life expectancy, age difference and potential sources of post-divorce income.
Younger ex-spouses generally find opportunities to recover and have adequate time to pursue them. The opportunities and time to recover for spouses divorcing late in life are usually much more limited. To ensure both spouses are financially secure after divorce, property and debt distribution often require different considerations than needed when spouses are young.
Home ownership. Disposition of a family home for young couples is usually straightforward for Phoenix, Arizona residents. Either the spouse with primary custody of the children will often keep the home or the property will be sold and profits split between the spouses. Older spouses should not automatically decide to sell the property as it may prove financially beneficial for one spouse to keep the home.
A reverse mortgage can provide a consistent source of income once a homeowner reaches 62. Access to government aid programs such as Medicaid and veterans’ pension programs may be limited by financial assets but not by equity in a primary residence. Seniors who have $100,000 in the bank may be prevented from accessing some programs they could otherwise use if that same $100,000 was in home equity.
Senior homeowners often enjoy property tax breaks and utility discounts but must live in the home to benefit. Even if a spouse foregoes those benefits by moving from the home, the property can generate a steady source of income as a rental, particularly in hot real estate markets. Alternatively, the ex-spouse may remain in the home but rent a room or a section of the home if feasible.
Retirements and pensions. In general, spouses are entitled to half the retirement or pension benefits earned during the marriage by either spouse. When both have retirement accounts, it may be simpler to just agree that each will keep his or her own account. Where one spouse does not have a retirement account or where there is a significant difference in account values, provisions must usually be made to divide the accounts.
Retirement and pension account provisions vary. Some may allow distribution of funds soon after divorce. Others may restrict distribution until one or both spouses reach a specific age. Extra time and effort may be required to obtain valuations of funds in these programs and to draft required paperwork such as a Qualified Domestic Relations Order to access the funds. Full knowledge of account values is essential to accomplish a fair distribution of property.
Social Security. While generally not an issue for younger couples, for spouses nearing 60 this issue holds great importance. A divorce decree cannot allocate Social Security benefits. Distribution is based on federal law. At age 62 a person married for 10 years can claim half of an ex-spouse’s Social Security benefit without reducing the amount to which that spouse is entitled. If the ex-spouse dies after 10 years of marriage, the survivor may be able to claim the full benefit at age 60.
For a person with a limited work history, obtaining a Social Security benefit based on the spouse’s work record can provide substantial income. If the marriage has not lasted 10 years, it may be wiser to consider a legal separation or other arrangement at least until requirements are met to access Social Security benefits.
Health insurance. One spouse often faces loss of health insurance coverage after divorce. Options may include extending existing coverage via COBRA provisions in the current policy or requiring the spouse with insurance to pay for all or part of a policy covering the soon-to-be uninsured spouse at least until that spouse becomes eligible for Medicare. A spouse already eligible for Medicare might also consider requiring the spouse with greater income to pay the cost of a Medigap insurance policy to supplement Medicare coverage.
The option of legally separating for a period rather than divorcing might be considered as well. Since the marriage remains legally intact, the insured party’s health insurance policy will usually continue to cover the other spouse.
Alimony and life insurance. Spousal maintenance or alimony can only be logically considered once the value and intended disposition of property is determined. If both spouses have been actively employed during the marriage and earning comparable salaries, alimony may not be needed. However, where one spouse left the job market for a considerable period to be the primary caretaker of the children, the requirement to pay alimony becomes more likely. The reality for at least one spouse in many late-in-life divorces is that opportunities will be limited to re-enter the job market at a salary sufficient to achieve financial independence.
When alimony is ordered in a divorce involving older couples, the person paying should be required to maintain a life insurance policy naming the alimony recipient as beneficiary. This protects the recipient from being cut off from a stream of needed income should the payer unexpectedly die.
Estate planning. Once the divorce is final, ex-spouses should revise wills, medical directives and other documents that designate beneficiaries or have given power of attorney to the other spouse. Spouses may want to consider whether the divorce decree should include provisions to establish trusts or require that specific provisions be maintained in each person’s will for benefit of children.
Couples in a long-term marriage generally have accumulated more assets over time.
Anyone contemplating divorce would be wise to consult an attorney for advice and assistance. Particularly when a divorce comes late in life, the guidance of a tax consultant may prove equally necessary and valuable as most divorce issues basically involve a numbers game. Legal and financial assistance can help ensure you obtain a fair division of assets to provide financial stability for years to come.
Discuss Your Options at an Initial Case Review with DeShon Laraye & Pullen PLC
At DeShon Laraye & Pullen PLC, we know how to navigate the complexities that surround child custody issues skillfully. You don’t have to face the court or your ex alone in court. Contact one of our divorce attorneys for an initial case review. You can schedule a meeting with our divorce team by calling (602) 252-1968 or sending us a message via our online request form.