“Grey Divorce” in Season? (Part One)

gray divorce women finances

With divorce now more commonplace, people will marry two or three times in their lives. We have seen a recent trend in a higher frequency of individuals over fifty divorcing, a phenomenon dubbed “grey divorce.” When individuals in this age bracket divorce, they have multiple financial issues to address unique to their situation – less time and viability left in the workforce, fixed incomes, retirement savings, health insurance and long-term care. We want to take this post and the next to discuss what “grey divorce” individuals should consider prior to any final agreement.

People over fifty likely have a family – children and perhaps even grandchildren. If a second marriage, that family has different and opposing interests to the current estranged spouse. Consequently, structuring an agreement that puts the interest of biological or adopted children over a spouse unrelated to these children is often paramount. The best way to do this is at the time of the second marriage through a prenuptial agreement that would separate property in a way that assures all of that property passes to descendants rather than to an estranged second spouse. A second option would be a postnuptial agreement to accomplish the same.

But what if the spouses have separated without an agreement?  In this situation, the spouse with more to protect has more to lose.  For example, if one spouse has significant investment accounts titled solely in that spouse’s name, the contributions and interest earned on those sums during the marriage would be considered marital property.  Depending upon the length of the second marriage, those funds subject to marital division could be substantial.  To protect that property, that spouse likely will have to find an offset for those assets to satisfy the estranged spouse – perhaps as simple as waiving rights to that spouse’s investments.  The more the spouses in the second marriage commingled property by titling assets jointly or placing funds in an account shared by both spouses, the harder it will be for each spouse to prevent diluting what they hoped would be their estate to pass on to their heirs.

Property division becomes complicated in another way for “grey divorce” – the marital residence takes on a higher value because it is likely one if not both spouses may be unable to afford buying and financing a new home. In general, maintaining the lifestyle during the marriage after “grey divorce” is harder than in younger marriages because employment opportunities dwindle, particularly for spouses who have not been in the job market during the marriage. Both spouses may need to consider downsizing. Or, if one spouse has the means, that spouse might pay the other spouse for the marital residence or pay for that spouse to stay in the marital residence in exchange for other assets.

In our next post we will discuss issues of spousal support, health insurance and issues of aging.

If you have questions about “grey divorce,” contact us – we can help.

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