Later-in-Life Divorce Finances

For many Baby Boomers, “gray divorces” are ever prevalent.  According to research from the National Center for Family and Marriage Research at Bowling Green University, the divorce rate for adults ages 50 and older doubled between 1990 and 2010.  If you are over 50 and headed for a divorce from a long-term marriage, it may be complicated to come to a settlement agreement that will safeguard a comfortable financial future. 

“There are no ‘do-overs’ after you agree to a settlement.  After 50, you’ll have fewer years to recoup from financial errors, so it’s essential to get this right.”  Below are a few tips for protecting your finances during a later-in-life divorce.

• Stay level-headed. Try to view divorce as a business deal.  “The more a couple is willing to divide assets objectively, and not emotionally, the faster they can complete the process and move on.”
• Use a third party. While some couples are able to mediate on their own, other couples may need an impartial third party to provide guidance.  A financial adviser can be useful to “triage all assets and provide accurate valuation and liquidity for each item.”
• Analyze shared and individual debt. “Hidden debt is a common nasty surprise among divorcing couples.”  It can be even worse if you live in a state with community property laws, “You’ll be held responsible for half your spouse’s debt, even if the debt isn’t in your name.”
• Analyze assets and retirement benefits. Since most assets will be considered marital assets, consider a lump sum payment to yours spouse for less than what a payout would be to hold onto assets.  It may also be a good idea to transfer certain assets into a life estate or into a trust for other family members. 
• Consider children and grandchildren. Estate planning during a divorce may clash with existing estate plans that gift assets to trust s and to children and grandchildren.  This could affect immediate generations and your taxes.  Determine how the divorce will financially impact any children and try to minimize damage to existing estate plans as much as possible, particularly in terms of inheritance.

See Anna Helhoski, Protect Finances in Later-in-Life Divorce, USA Today, Nov. 23, 2014.