During gray divorce, spouses often face significant financial challenges, along with unusual difficulties in identifying and dividing marital property.
People getting divorced often experience overwhelming emotions, from anxiety to depression. Due to these stresses, many divorcing spouses may have trouble focusing on issues such as property division and post-divorce financial planning. This may be especially true for older spouses who are ending long-term marriages.
These "gray divorces," which involve couples over the age of 50, are occurring more frequently than ever before. According to The New York Times, since 1990, the rate of divorce among these couples has more than doubled. Furthermore, this pattern is only expected to continue. Unfortunately, this kind of late-life divorce has the potential to prove financially crippling if couples are not careful.
Financial stumbling blocks
There are several reasons that older couples need to pay more attention to financial issues during their divorces. These include:
- The presence of complex assets - the marital property of older couples often includes retirement plans and accounts that may be overlooked during asset division. These are often high-value assets, so oversights may have huge impacts.
- Burden of retirement costs - as USA Today notes, covering retirement costs independently can be much costlier than contributing to half of a shared retirement. As a result, many couples may find themselves short on needed savings after a gray divorce.
- Age-related concerns - older adults have less time to make up for financial losses resulting from divorce. They also may have more restricted earning capabilities. For instance, spouses who left the workforce or gave up job opportunities may have trouble supporting themselves independently.
The most effective way for spouses to address many of these issues is by planning ahead and properly dividing complex retirement assets and other marital property.
Splitting community property
Nevada observes community property laws, which hold that marital property belongs equally to both spouses. Most assets and debts that spouses acquire during marriage qualify as marital property, regardless of which spouse obtained them. However, there are exceptions for gifts, inheritances and certain personal injury settlements, which are classified as separate property.
While dividing community property in half may seem straightforward, a few issues can complicate the settlement process. Separate and community property can become mixed if one spouse uses marital property to pay for a separate debt, or vice versa. Retirement accounts that spouses contributed to before and after marriage also represent commingled assets. Usually, determining an appropriate division of these assets can be challenging.
Planning for the divorce
According to The New York Times, many experts recommend that older spouses work with a financial planner while preparing for divorce. Doing so can help spouses more accurately understand and present their financial need in divorce court. This will not change the way that property is divided, but it may influence a judge's decision to award alimony to one spouse.
For older spouses, seeking the advice of an attorney early on is also advisable. An attorney may be able to help a spouse understand the relevant laws, account for all marital property and pursue a reasonable alimony award. This may significantly help a spouse's long-term financial standing, considering the unusual financial issues that gray divorce can introduce.