How Divorce Can Affect Your Finances Later in Life
Divorce is generally a tumultuous time, no matter when it occurs. Financial issues are a common cause of strain during the divorce process, from how resources will be divided to alimony or childcare payments and which assets are included in the calculations. But you may be surprised to learn that those who divorce after the age of 50 are in for even more complicated financial situations. Read on to find out more about how divorces later in life differ from those earlier in life, especially from a financial perspective.
Gray Divorce as a Growing Trend
According to research, divorce rates have been going down overall for most populations. Interestingly, the divorce rate for people over the age of 50 has been increasing in recent years. Researchers cite a number of factors in this increase, including the stigma around divorce lessening; changes in laws that have made divorce a more accessible option; and the fact that life expectancy and quality of life have both increased, which means people over 50 may want to start a new life without a spouse more often than they used to.
While there’s no single reason that older couples are divorcing, this new trend, referred to as gray or grey divorce, has introduced complications for those going through the divorce, particularly when it comes to financial issues.
Lengthier Marriages Mean More to Divide
Often, people divorcing after the age of 50 have been married for a longer time than those seeking divorce earlier in life. Typically, the longer the marriage then the greater chance of spousal support being ordered, especially when one partner earns more than the other.
At the same time, dividing a household’s assets is a bigger task when the couple has been together longer, as each asset needs to be identified as either separate property or community property, and then determine the division.
Tax Complications Around Retirement Funds and Entitlements
Another issue in gray divorce is how close individuals may be to retirement when they divorce. Wealth accumulated through retirement planning like a 401(k) or IRA can be divided in divorce depending on the start date and how the account was funded. However, taking money out of a retirement account early to pay a settlement with your ex-partner can cost you a hit on taxes, too. It is best to explore all options when considering retirement accounts.
Issues Around Getting Married Again
After a divorce, many people swear they’ll never get married again, but it ends up most of them (nearly 80 percent) will, and it actually becomes more common to remarry if you’re over 50. However, some divorced individuals are hesitant to remarry because it may end their alimony payments. This is especially a consideration for someone whose first marriage was longer, because they are more likely to have received a permanent or long-term settlement.
Estate planning, which is important for any couple, can be even more important for those who have divorced after 50 and wish to remarry. This is especially true if either individual in a second marriage has children. You may assume that your spouse will “do right” by your children after your death, but the truth is, they will have no obligation to do so if you haven’t spelled it out in your will.
Gray divorce may be a growing trend littered with complications, both emotional and financial, but with the right legal support, these landmines can be mitigated or avoided altogether. If you are looking to divorce or remarry, contact an attorney or call our firm at 505-872-0505 to discuss estate planning, family law, or prenuptial agreements.