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 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 would 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 a “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.
Employment with “grey divorce” usually goes one of two ways – one spouse has a long career that still has years of earning power prior to retirement and the other spouse has been underemployed or out of the workforce, or both spouses are nearing retirement and have relatively fixed incomes.
In the first scenario, the lesser-earning spouse will want spousal support or maintenance. Generally, courts in Missouri see maintenance as a stopgap on the road to self-sufficiency. However, spouses at this age who have been out of the job market will not have great prospects of reentering the workforce – they likely face minimum wage. On the other side, the higher-earning spouse has only a fixed number of years left at that wage before retirement, at which point the ability to pay maintenance dwindles. Spouses in this situation will want to consider contractual maintenance that will limit maintenance to a fixed sum for a fixed period of years. Or the higher-earning spouse might want to offer a larger sum of retirement benefits to help the lesser-earning spouse when that spouse will need money the most. Either way, the lesser-earning spouse has to be proactive to ensure some level of financial security.
In the second scenario, the ability of one spouse to pay is limited even though the need of the other spouse may be high. In these situations, spouses must look at all available resources and make reasonable plans. What retirement benefits are available? Does one spouse qualify for the other spouse’s Social Security benefits? If some of these assets have a marital component, both spouses have an interest in working out a way that both get enough to have as comfortable a retirement as possible. Downsizing and adjusting lifestyles may be required as well, particularly since it is hard to expect a retiree to earn much in “side” employment.
The age of the spouses means that medical costs or potential disability or long-term care could be a reality and a financial disaster. While Medicare will cover certain costs, it will not cover all costs. Both spouses should take care to have secondary health coverage and some form of long-term care insurance. Should one spouse become disabled, Social Security covers some level of lost income, but a private insurance policy would better serve your particular needs. In the event of a divorce, these fears over the inability to be cared for in case of illness become quite stark, so you would want your higher-earning spouse to take some measures to cover this risk through insurance. Even more difficult than support issues are health issues. People pushing retirement face a higher likelihood of some form of health-related disability or chronic illness that limits their ability to earn and increases the degree of financial need. While Medicare can cover some of these health costs, it will not cover all. If one spouse has more available funds, the lesser-earning spouse should advocate for that spouse to purchase backup insurance plans – secondary insurance to cover what Medicare will not and long-term care to cover an unexpected and devastating illness.
As you can see, the gray divorce poses a great deal of financial questions not ordinarily of immediate importance for younger couples, and the urgency. We cannot stress enough how important it is for “grey divorce” persons to give strong consideration to issues associated with aging. This divorce may be the last opportunity for one spouse to ensure the ability to survive in the event of the loss of a job or the onset of a serious illness.
Should you need the assistance of an experienced divorce and child custody attorney in Creve Coeur and O’Fallon or have questions about your divorce situation, know that we are here to help and ready to discuss those questions with you.