Divorce during your retirement years, often called a gray divorce, can complicate your retirement plan. Spousal support, known as maintenance in Missouri, could be granted after a long-term marriage ends. Retirement assets will also need to be divided by the court as part of the overall division of property at divorce. Older couples sometimes drift apart and become dissatisfied with a long-term relationship. Once the kids leave home, some couples split and go on to lead separate lives. Here are 8 important issues to consider when navigating divorce in retirement.
1. Be prepared to provide your attorney with the documents and information needed
There are documents your divorce attorney will need to get your divorce underway. Gathering the documents requested and completing the financial forms in a reasonable timeframe will keep the divorce process moving forward. This is homework and will not be fun; however, you will be glad you took the time to gather these documents and complete your financial statements at the beginning of your attorney-client relationship. You will need copies of income tax returns for the last three years. Make copies of all bank accounts, securities accounts, and retirement accounts, for the past three months. You should do the same for all debt accounts held jointly or individually. You will also need at least three months of proof of monthly income for yourself and for your spouse if possible.
2. Find out if your Social Security payments will change post-divorce
The monthly Social Security benefit is a significant source of income in your retirement years, so it’s important to find out how a divorce might impact your Social Security payments. In general, you will be eligible for as much as 50% of your former spouse’s Social Security benefit if you were married for at least 10 years and are currently unmarried, if that amount is higher than the benefit based on your own earnings. Spousal payments are reduced if you start collecting benefits before your full retirement age. However, you may not be able to claim spousal Social Security benefit payments if you weren’t married for at least 10 years or you get married again. You can check your Social Security statement online at https://www.ssa.gov/myaccount/ or stop in at your local Social Security office to get a full understanding of your specific situation.
3. Determine what retirement benefits you are entitled to
If you were unable to determine the answer to this when gathering the documents and information needed for your attorney, then you need to take steps to find out if you or your former spouse is entitled to a monthly pension benefit. If so, you should get a copy of the latest statement and the rules and regulations for the pension plan. If you are unable to obtain this information, ask your lawyer to subpoena this information from your spouse’s former employer. Also, look at the retirement account balances you accumulated during the marriage as these accounts may need to be divided. This includes 401K statements, IRA statements, 403B statements, and other defined contribution plans earned during the marriage.
4. Be prepared for the possibility of spousal maintenance
Under Missouri law, a court may grant maintenance only if it determines that a spouse lacks sufficient property, including property awarded during the dissolution, to provide for his or her reasonable needs; and is unable to support himself or herself through appropriate employment or is the custodian of a child that makes employment outside the home unreasonable. Thus, for a court to even consider awarding maintenance, it must first find a spouse really cannot meet his or her reasonable needs through his or her own efforts.
But what does “reasonable needs” really mean?
Our courts have interpreted reasonable needs to be more objective than subjective, meaning that the spouse must put forth a budget of monthly expenses a court can determine as reasonable and necessary to continue in roughly the same standard of living as the spouse enjoyed during the marriage. Not all courts will allow the standard of living adjustment – it depends on the duration of the marriage and the reasonableness of the budget.
Additionally, our courts impose upon a spouse a duty to pursue self-sufficiency. A spouse may not just assume he or she will receive a monthly check forever – that was alimony before Missouri enacted its current Uniform Marriage and Dissolution Act. Instead, a spouse must make efforts to be reasonably employed. What does that mean? It again is both objective and subjective. If a spouse has sufficient education and training in a career, the spouse is presumed capable of resuming that career. If a spouse needs additional education and training, that spouse should pursue that avenue to become as close to self-sufficiency as possible. Only limitations related to age, ability, and medical condition would constrict a court in imposing some level of full-time employment.
After the court finds the spouse needs some help in meeting monthly needs, the court has ten factors to consider in determining the amount: the financial resources of the party seeking maintenance; the time necessary to pursue additional education or training; the comparative earning capacity of each spouse; the standard of living established during the marriage; the obligations and assets apportioned to each spouse during the dissolution; the duration of the marriage; age, physical and emotional condition of each spouse; the ability of the spouse paying maintenance to meet his or her personal needs and also contribute to the needs of the spouse receiving maintenance; the conduct of the parties during the marriage; and any other relevant factors.
As you can see, the statute gives the court specific direction to arrive at a reasonable sum for maintenance. In general, the longer the marriage, the more likely the court will award some maintenance, particularly if the dependent spouse spent most of the marriage caring for the children. The court will look at the monthly budget of expenses of the receiving spouse, determine what is truly reasonable, and find the gap between expenses and reasonable income. The gap will be the sum for maintenance, subject to the ability of the other spouse to afford it.
5. Decide if you will keep the house
Keeping the marital home can be a mistake. The marital home may be a source of cash for you to use after divorce. The cash equity received from the sale of the marital home can be used to pay off debt and have a fresh start. It can also be used for an emergency savings fund or an investment fund to add to your current retirement assets.
The marital home may be more home than you really need. Ask yourself if you really need all that square footage and whether the annual cost to maintain is worth it to you. Keep in mind that it’s not just the monthly mortgage; rather, it’s the insurance, taxes, utilities, lawn service, homeowner’s association dues, etc. Also, you need to consider the cost of major repairs, roof, siding, windows, air conditioning, pool, driveway, painting, etc. as these will inevitably come along and you would need to be prepared for such a major expense. Last, you should also consider if you have the time to be a homeowner. If you weren’t the spouse who handled all the repairs or the hiring of repair people and you are now both a single individual and a single parent, do you have the time necessary to maintain the house and yard?
Selling the marital home may be a good idea. Selling the home at divorce allows you and your former spouse to share the expenses incurred in getting the house ready for sale. It also allows you and your former spouse to share the realtor fees and closing costs incurred for the sale. For a $500,000 home, realtor fees at 7% would be $35,000.00 as a shared expense instead of one incurred by you alone if you sold the home later.
Selling the home at divorce also affords you the opportunity to avoid the expense of major repairs and ongoing maintenance costs. If you underestimated your budget or overestimated the amount of money you would have available to spend each month, you may not be financially able to pay for the repairs and maintenance needed. This could result in deferred maintenance that you will then incur at the time of sale as you will need to get the home ready before listing it for sale.
6. Be prepared to divide household furniture and furnishings
If one spouse is keeping the house, then that person will likely keep most of the furnishings. If you’re selling the house, then you will need to make a list and negotiate with your spouse about who gets what property. Family heirlooms will go to the spouse who brought the item(s) into the marriage. Otherwise, you will have to decide who gets the bedroom set versus who takes the living room furniture. But in many households, there’s nothing particularly valuable for you to fight over.
7. Communicate with your adult children
Most couples do not want to involve their children in their divorce any more than they must. If the kids are in college or living on their own and building careers and families, the practicalities are much easier to finesse. Try to resist playing the blame game and agree with your former spouse to share time with your children and grandchildren. Remember, you’re still the parent and will also need to discuss your estate planning with your children since you will no longer be married. Discussions regarding the executor of your will, the trustee of your trust, or the power of attorney for health care decisions are necessary when divorcing after a long-term marriage.
8. Talk about who is keeping the family pet
A retired couple is likely to have a pet at home. There are two aspects for deciding who is keeping the family dog or cat. First, which spouse takes care of the pet and is most closely attached to the pet? Second, whoever is keeping the pet must remember the expenses incurred to take care of a pet which needs to be taken into consideration for financial decisions such as keeping the house or spousal maintenance.
Should you need the advice of an experienced divorce attorney or have questions or concerns about your situation, know that we are here to help and ready to discuss those issues with you.