About five years ago, I was at a bar function with judges and other colleagues. I was standing in line and I struck up a conversation with a judge whom I have frequently appeared before in court. I politely asked him how he was doing. He replied by stating, “You know, I now understand why people get divorced later in life. My children are off to college and my wife and I are looking at each other wondering, ‘now what?’ We have been so focused on our children we don’t know who the other person is anymore or what our shared interests are.” I saw him again recently at another bar function and asked him how his wife was doing. He informed me that he and his wife had divorced. Unfortunately, the conversation I had with the judge is not uncommon and is one of many reasons why long term marriages dissolve. Studies have shown that while the divorce rate among younger couples has decreased, the divorce rate among married couples over the age of fifty has increased significantly. This trend has become known as the “Gray Divorce.”
While the custody and parenting time are no longer issues in Gray Divorces, the financial issues may be more complicated because it is a longer-term marriage. I have touched on six important financial issues couples may face in a Gray Divorce:
There are several factors the court considers in awarding spousal maintenance. One of the factors considered is the length of the marriage. Many Gray Divorces involve marriages that are over twenty years. This would be considered a long term marriage and permanent spousal maintenance would most likely be awarded. Furthermore, in a Gray Divorce, usually one spouse stayed home to take care of the children. Even if the spouse earned a college degree, it is unlikely that he or she will be able to be capable of being self-supporting due to being out of the workforce for so long. Therefore, requiring the spouse to return to the workforce in an entry level position to contribute to his or her own support may be a trial issue.
Older individuals who have been in the workforce longer have most likely climbed the corporate ladder or may be owners of a successful small business. As a result, their employment benefit packages may be more robust and valuable than an individual who is in their early thirties. Employment benefits may include stock options, restricted stock options, stock appreciation rights, deferred compensation, and expense reimbursements such as car, cell phone, travel, meals and entertainment. It is important to be aware of the various employment benefits as they may be relevant for both division of assets and determining spousal maintenance.
Couples who have been married longer have had a longer time to save for retirement together. If one spouse stayed home with the children during most of the marriage, that spouse may not have a retirement account. Furthermore, older couples may have a pension as a part of their retirement benefits, which is not an employment benefit often seen by much younger couples who are divorcing; companies are just not offering it in recent years. Furthermore, if couples are in their sixties, they may be in payment status of their pension. If this is the case, it may affect spousal maintenance and the division of the asset.
Social Security Benefits
One issue unique to Gray Divorces is social security. Many individuals at this stage in their life are either receiving social security or near the age of receiving it. A spouse who has not worked for the majority of the marriage may have a small social security benefit. In this case, because the couple has been married for more than ten years, the spouse who has a small social security benefit has the option to elect to receive half of the other spouse’s total monthly social security benefit. This is important because of its relevancy when determining the amount of spousal maintenance for both the payee and the payer.
Inheritances (Non-marital Property)
Given that many individuals in a Gray Divorce are over the age of fifty, it is a higher possibility that they received an inheritance than with younger couples in their thirties. Inheritances are a form of non-marital property. If a party received an inheritance, it is important to determine whether the inheritance has been commingled with marital funds. It may be necessary for such couples to hire an expert to trace the non-marital funds.
Liquid vs. Illiquid Assets
Most couples have assets that are both liquid and illiquid. It is important to understand the potential financial impact these assets may have in a division of assets. Maintaining the homestead is an important goal for many individuals in a divorce.; it is equally important to maintaining a family. While both assets have a value, illiquid assets can have a negative impact on cash flow. Cash flow is important in determining spousal maintenance. Sometimes it is not financially prudent to keep the homestead because of the additional expenses associated with maintaining a home. Additionally, there are tax consequences that must be considered with some liquid assets such as investment accounts, 401(k)s and stock options (e.g. tax penalties and capital gains). These are important issues to consider and to discuss with an attorney.
Overcoming the Challenges of a Gray Divorce
For many who are going through a Gray Divorce, it can extremely overwhelming. They are about to encounter a significant change to the life they were familiar with for twenty years or even longer. For some, this change may not be welcomed, but it has been decided for them. Individuals are living longer, and the question of whether they will receive enough marital assets to get them through retirement is a real fear that cannot be ignored. Therefore, it is important to take steps to understand the process and to consult with an attorney who has substantial experience in handling complex financial divorces. Your attorney should understand the unique issues that arise in Gray Divorces to help guide you and to advocate for you throughout the entire process.
With nearly 20 years of high profile experience as a family law attorney, today Beth W. Barbosa focuses her practice on complex cases of high marital assets that draw on her ability to engage authorities with specialized talent and expertise such as financial neutrals, independent business appraisers, real estate authorities and others with specialized knowledge. She does this to both protect and advance her client’s interests.