Financial Factors To Consider When Contemplating Gray Divorce

The divorce rate in the United States over the last two decades has slowed or even declined according to some sources, but among those ages 50 and older the divorce rate during the same time period has doubled. Divorce later in life is referred to as “gray divorce”, and many in the baby boomer generation make the choice to divorce after the children have grown, realizing they may not enjoy the person they married at a younger age and wish to enjoy the remainder of life with someone they do enjoy. Divorce at any age comes with challenges but those who divorce later in life must pay special attention to their finances in order remain comfortable through old age.

Since splitting assets when retirement is not too far away can complicate the divorce process, those contemplating divorce later in life need to create a financial plan and think long term. Understanding what resources you need and how to divide assets will make the process easier.

To start, those going through a gray divorce need to focus on the long term rather than the short term and creating and sticking to a financial plan is important to help meet long term goals. When you make a financial plan, you better understand available retirement assets and when you are able to retire. A financial plan will help you chart out whether to cut expenses, work longer or change retirement goals. A financial plan is especially important if it was a struggle to meet expenses with two sources of income-one source of income and splitting assets may only exacerbate the issue.

The first step in creating your financial plan is to understand the cost of your current lifestyle and understand the costs of the lifestyle you’d like to live after divorce. When contemplating these costs think about daily expenses because saving for retirement or other long term goals cannot be done if more money is spent than comes in. Next, figure out your cash situation by reviewing your sources of income. If you are the spouse who worked for a number of years and your soon to be ex-spouse did not, think fairly about what your partner may need. Sometimes, if a couple wishes to remain friends they may come up with joint goals when creating their budgets that way both parties can expect a degree of financial comfort.

However, all couples will not be friends after divorce and therefore you should also protect yourself. To preserve accounts and to prevent an ex-spouse from taking a loan out on an asset, send letters to banks or institutions in charge of the assets to ask for alerts on any significant changes, such as large withdrawals or names removed from the account. To prevent a spouse from selling the house before the divorce is final, consider filing a lis pendens. The document is filed with your property records and provides notice to anyone looking at the property that it’s subject to a divorce proceeding.

After creating a budget and taking steps to preserve assets to be divided, it’s important to understand what assets you may be entitled to. Even though you may be entitled to certain assets according to New Jersey’s property division rules, it may be better to think about what you need. Instead of being entitled to half of an account or asset, it may be best to make tradeoffs. If there are multiple savings accounts and a pension plan of similar value, it may be best for one spouse to take the retirement accounts and the other to take the pension plan. The benefits and costs of keeping an asset should also be contemplated. Often, one spouse will retain the family home in divorce, but maintenance costs, the burden of a mortgage and home appreciation may mean that neither spouse should keep the home.

Couples should also review documents with both spouses’ names like estate plans and insurance policies. You should review each plan and policy to determine whether the plan should be held jointly or not and to update beneficiaries. Finally, couples married for at least 10 years should be aware of the rules for Social Security retirement and disability benefits. An experienced divorce attorney can help an individual who wants to divorce create a financial and property division plan.