“Shades of Gray – Part Two”

“Shades of Gray” Part Two

In a previous blog we wrote about the increase in divorce proceedings among older couples in their 50s and 60s and approaching retirement. We discussed several reasons for that, and here we explore some of the unique issues facing a couple that decides to divorce at a later stage of life.

Divorce at any stage of life can have significant financial consequences for a couple, but younger people have an opportunity to rebuild savings and assets, where older people do not. Because of this, in a “gray divorce” it is important for the parties to understand their financial needs and the ramifications of the decisions they make in dividing their assets. The most important issues that need to be addressed are as follows:

1. Retirement Assets: For an older couple divorcing after age 60, retirement assets are typically the largest asset, or the largest next to the marital residence. This would include 401Ks, IRAs, pensions and other financial tools meant for long-term financial planning such as whole-life insurance. The usual outcome from a long-term marriage is for these items to be divided equally. In determining appropriate division, one must also take into account likely income tax consequences depending on the character of the asset.

In addition to the retirement assets, the marital home could also be considered an asset that was part of the couple’s long-term retirement planning. The issue of disposing of the marital residence likely needs to be addressed unless one of the parties desires to keep it, in which case the appropriate adjustment of division of other assets becomes an important issue. It is also important that the decision be realistic so that the person determined to keep the home is not financially crippled by the continued obligation to maintain that asset.

2. Social Security Benefits: The rules for a lower-earning spouse, who may have been a stay-at-home parent, make it complicated for one to determine how to incorporate future Social Security benefits or current Social Security benefits into decision making about divorce settlements. It is important to get expert advice to determine the potential Social Security benefit payable to the lower-earning spouse.

3. Health Insurance: Since any health insurance someone has through their marriage is, ultimately, terminated at the conclusion of a divorce, the parties must take this into account and plan carefully how they will have health care coverage when the divorce is final. Medicare coverage is available at age 65, but there may be a gap between when the divorce is filed and attaining that age. This should be taken into account in determining the financial need of the person left without health insurance from an employer.

4. Spousal Support: We have discussed the numerous factors that courts look at in determining an appropriate level of spousal support in a prior blog. Those most important when dealing with a “gray divorce” would be:

   a. The current age of the parties;

   b. The present and future earning capacity of the parties including history of limited participation in the workforce (if appropriate); and

   c. The standard of living established during the marriage.

Especially in a divorce of an older couple, the parties need to be aware of what their means and ability to earn are, post divorce.

The issues that arise in a “gray divorce” are multifaceted and complex. It is important to seek out the advice of knowledgeable professionals.

Should you have questions about a Divorce involving a couple approaching retirement age contact the law firm of Damon, Ver Merris, Boyko & Witte, PLC at (616) 975-9951 to speak to one of our Grand Rapids Divorce or Family Law Attorneys. We are here to help you. – Curtis R. Witte / April 12, 2018

While this posting originates from a law office, none of the contents should, in any way, be considered legal advice. If you have not signed a retention letter describing the legal services to be provided and the amount to be paid for such services, you are not a client of this firm.