If you are over the age of 50 and have decided that it’s time to finally unshackle yourself from the old “ball and chain,” you are not alone. In fact, you are part of the gray divorce boom. Even as divorce rates across the United States decline, your age group is bucking the trend.
Baby boomers are now divorcing at the highest rates in U.S. history, with a divorce rate that’s more than doubled from 1990 to 2010.
Divorce might offer you the liberation you’ve been craving, but older couples also face unique divorce challenges. When you’ve been together for a long time, decoupling can get a little complicated. Here are five issues that can be extra tricky for divorcing baby boomers:
1. Identifying Pre-Marital Assets
A big part of the divorce process entails separating your shared marital assets. Step one in that process is identifying which assets are part of your marital estate and which assets are pre-marital possessions. This would be pretty easy if you had only married your spouse two or three years ago, but after several decades of being together, memories tend to blur together.
For example, you may struggle to remember which pieces of jewelry you owned before your marriage. In other cases, pre-marital assets can get mixed into marital assets, such as if your husband used money in his pre-marriage savings account to buy your house after you were married. Does that money still belong to him, or is it now part of your shared asset?
2. Finding All Marital Assets
A young broke couple won’t need to work too hard to identify and divide up their few assets. Older couples, however, have had decades to build up a complex portfolio of savings, investments, and asset holdings. Additionally, you and your spouse are likely in your prime earning years. That might mean you’ll have to determine the value of unique assets, such as:
Bonuses
Stock options
Ownership stakes
Rental properties
Executive compensation packages
Travel perks
Car allowances
Credit card miles
Patents
As you start your divorce process, make sure you collect as much paperwork and documentation as possible so that you can identify every asset you and your spouse own!
3. Social Security
Retirement is on the horizon or may already be here! If you and your spouse have been married for more than ten years, even after divorce you may be able to take advantage of his Social Security history. If your individual Social Security history is less than half of his, then you can opt to receive a benefit equal to half the amount of his. This will NOT affect his benefits; but rather simply increase how much you receive. This is true even if he remarries.
Many women don’t know about this advantage, so make sure to keep it in mind, especially if you’re close to that 10-year anniversary.
4. Inheritances
Older adults are more likely than younger spouses to have lost both parents, which could result in receiving an inheritance. Inheritances are not marital property, but again, things can quickly get complicated when money from an inheritance is used to purchase marital assets. What if you received $500,000 from your parents’ estate and put that money toward the cost of your dream home, which you and your husband purchased with savings and with the inheritance?
Here’s another potential pickle: if your husband received $3 million from his unmarried brother who passed away, is it really fair when you split your shared assets 50/50 and he comes away with his half of your marital estate AND the $3 million? A big inheritance can change the dynamic of a divorce settlement and affect what “feels” fair rather than what the law says is fair.
5. Retirement Accounts and Pensions
By this time in your life, your retirement account will (hopefully) be pretty substantial. If your husband was the main breadwinner, then his retirement account may represent a huge asset. Dividing a retirement account can be tricky, and will require extra paperwork, including a Qualified Domestic Relations Order (QDRO). The administrator of your husband’s plan will also have to get involved, and you’ll need to decide whether you want to roll your share of your husband’s 401(k) into your retirement account, keep the money in his account until you retire, or take out a lump sum payment within a special penalty-free window.
Pensions are even trickier than 401(k) accounts, especially if you or your husband isn’t yet retired. How can you make sure you get your share of your husband’s pension, and what will happen to your pension if he demands a cut?
These are all difficult questions, which is why it is so important to work with a knowledgeable divorce attorney and divorce financial planner (CDFA). If your marital estate is complex, it probably isn’t a good idea to do a divorce on your own.
Our group can help you identify marital assets and premarital assets, determine a fair divorce settlement, and figure out how to divide even your most complex assets.