By Maxim Law of Maxim Law, PLLC posted in Property Division on Monday, March 17, 2014.
According to the New York Times, divorce after age 50 is growing more common:
So much for “till death do us part.” For the first time, more Americans 50 and older are divorced than widowed, and the numbers are growing as baby boomers live longer. Sociologists call them gray divorcees.
So what then should people over 50 expect when they get divorced? How should they plan ahead when divorce looms on the horizon? Here are six financial considerations for those facing a “gray divorce”:
Understand Your Social Security Benefits
Reviewing the benefits available to you through social security at different retirement ages is critical when you are divorcing later in life. If your marriage lasted 10 or more years, you are eligible to receive social security on your ex-spouse’s record, even if he or she remarried. The benefit for divorced spouses is equal to one-half of your ex-spouse’s full retirement amount (or disability benefit) when you wait until your full retirement age to receive benefits.
To qualify for this benefit, you must be unmarried, age 62 or older, your ex-spouse is entitled to Social Security retirement or disability benefits, and the benefit for which you are eligible based on your own work is less than the benefit you would receive based on your ex-spouse’s work.
Even if you do not wait until full retirement age or if you continue to work, you may still be eligible for benefits through your ex-spouse. More information on social security benefits after a divorce can be found at http://ssa.gov/retire2/divspouse.htm.
To Keep or Not to Keep the Family Home?
This may be a big decision in your divorce if you have lived in the same home for many years where you have raised children. Some people are very attached to the home, some are not, but you should consider your feelings about the home and be mindful of the underlying reasons you desire to remain living there or to relocate and downsize.
If the home is going to be sold, you and your spouse will have to make decisions about dividing the household goods and furnishings accumulated during the marriage, what maintenance and repairs to make to the home – if any – prior to selling it, and how the proceeds from the sale of the home are to be divided. If you have marital debt to to pay, you should consider paying all of it off with proceeds from the sale of your home if there are sufficient funds to do so.
Create an Accurate Household Budget
In Minnesota spousal support is determined by one spouse’s need for financial support and the other spouse’s ability to pay support. When either you or your spouse is asking for spousal maintenance, creating an accurate and comprehensive household budget is critical. You will want to create a historical budget that reflects your living expenses during the marriage. This will help you determine your “standard of living” during the marriage, which is one of the factors considered under the spousal maintenance statute.
Additionally, you will create a projected budget that reflects your reasonable expenses after the divorce and will include budget items you may not have had in the past such as health insurance premiums, which may have been paid for by your spouse.
Even if neither spouse is asking for spousal support in the divorce, this is the time to create a budget and become more mindful of your finances as your expenses may increase after the divorce. Getting a handle on your expenses earlier in the process will serve you best in the long run.
Equitable Does Not Always Mean Equal
In Minnesota, assets are subject to equitable division. This means that assets are not necessarily divided equally. A court has discretion to divide assets somewhat unequally depending on the particular circumstances of your financial situation. Divorcing spouses may consider whether to award more of the assets to the spouse who earns less income or was out of the workforce for a lengthy period of time to reduce his or her need for monthly spousal support payments from the other spouse’s future income.
As well, it should be determined whether or not you have a “non-marital” interest in any of your assets. Most commonly, non-marital assets include those that you acquired before the marriage or those that were gifted to or inherited by you during the marriage. Determining your interest in non-marital assets can be complex depending on whether the particular asset has accumulated value during the marriage. Typically, non-marital assets are not subject to division between spouses in a divorce; however, if one spouse is left with very little assets that will create a financial hardship for him or her, the court may consider allocating some of the other spouse’s non-marital assets to the spouse in need.
For older couples with significant retirement assets, determining whether to divide a retirement account, such as a 401(k), with a Qualified Domestic Relations Order (QDRO) or whether retirement assets may be offset with a different asset will also be considered.
Consider How You Want To Divorce
Last but not least, considering how you want to proceed with your divorce is extremely important. For those with significant assets, it is important to get legal advice. But just because you choose to work with a lawyer does not mean you are bound to have an acrimonious or contested divorce. You will have the option to proceed cooperatively and attend mediation or another form of alternative dispute resolution to discuss the issues in your divorce and how you will settle them. Close consultation with your attorney can help you decide the best way to reach an early and amicable settlement.
For more information specific to your situation, contact attorney Allison Maxim at Maxim Law. (651) 294-2407.