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Late In Life Divorce

While we all hope it never happens to us, the divorce rate is still roughly at 50%. A recent study by the PEW research has found that among those, 65 and older divorce rates have tripled since the 1990s.

Divorce at any age is difficult for the couple and their families, but once you enter the retirement age bracket, divorce can have a lot of unforeseen consequences. To help you or your loved ones navigate through this difficult time, we have some recommendations from Gayle Rosenblum of Rubin & Rosenblum Divorce and Family Law Firm.

Assets

Divorce isn’t just a parting of ways romantically. Divorce is the dissolution of a financial partnership, and when divorcing later in life, you’ve likely acquired more assets than if you were separating earlier on. If you’re in a relationship where one partner has more knowledge or control over your assets, it’s important in a divorce for all information to be transparent.

Retirement

Retirement accounts are a critical component of your assets during a grey divorce. First things first, you need to understand the type of retirement savings you have established. These retirement accounts must be established in one person’s name, 401(k)s are not joint accounts. However, if what’s in the accounts was accumulated over the course of the marriage, it is irrelevant whose name is on the account.  

In order to avoid tax consequences, when splitting retirement accounts, it has to be via legal separation. So, if for personal reasons you are separating but have no intention of a legal divorce, you must go before a court and legally become separated in order to split those funds. There are two methods of splitting funds once you’ve reached this phase in your divorce:

  1. Direct Rollover - money is transferred from one spouse’s accounts directly into the others.
  2. Qualified Domestic Relationship Rollover - Some plans require more legal involvement in order to separate retirement funds. This will involve a court order being sent to your plan in order to ensure that this is a qualified rollover.

Regardless of which path is right for you, once this has been assembled by your legal team, it will be submitted to the courts to be signed off by a judge and executed by the plan administrator. This is how the non-title spouse is able to receive funds not originally in their name.

Inheritance

An inheritance is one asset that if kept in a separate account can remain solely yours following a divorce. While you may have a great marriage now, it is not always advisable to mix this money into your marital accounts.

Social Security

First and foremost, we need to address that in order to receive a portion of your spouse’s social security you have to be married longer than 10 years. If your marriage is less than that you will not receive this as part of your soon to be assets. There are several other components to divorce and social security that we discuss in Social Security Conundrum Pt. 4.

Businesses

The first step in splitting a business upon divorce is determining the value of this business because it’s considered an asset. Oftentimes people don’t initially have a value connected to their business, they simply know the value of the revenue stream generated from the business. Based on these two values the courts normally can’t force a sale of the business, and this becomes an asset to divide by your legal team.

Insurance

Health

You cannot pay on your spouse's health insurance once you are divorced. Period. If you are a part of your spouse’s health insurance package you will have to sign off knowing that upon divorce you will be without. There are instances where one spouse will find other options to continue to provide their ex-spouse with life insurance, but as a matter of law it cannot remain the same.

Life

For life insurance, it is often used to secure spousal and child support if that spouse were to pass. Ultimately that is the only requirement of life insurance, is if you will maintain it for the benefit of one another and your family.

As you already know, relationships are complicated, and ending one is no different. Be sure if you’re entering a separation to have all the information you can from your financial advisor and be sure you have an excellent legal team backing you.


Special thanks to Gayle Rosenblum for all her insight. For information from Gayle check out her website at: https://rubinandrosenblum.com/


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Larry Heller, Not Your Average Advisor.

 

A CFP® (Certified Financial Planner) and a former CPA.

Has helped solve complex financial planning for 20+ yrs.

Member of Wealth Management Think Tank.

A financial advisor think tank that meets monthly to discuss investment strategies and planning opportunities.

Larry is approached regularly by the respected journals.

“Journal of Financial Planning”, and “The Wall Street Journal”.