January marks “divorce month” because many couples delay initiating divorce proceedings until after the holidays, using the new year as a catalyst for major life changes and fresh starts. One form of divorce that continues to be on the rise is called ‘gray divorce’ and it happens when couples over the age of 50 are choosing to end their long-term marriages.
Statistics about gray divorce, according to Psychology Today, indicate that
- the rate of divorce for couples over 50 has doubled in the past three decades;
- rates of infidelity are highest for men in their 70s and women aged 50-70;
- many couples reevaluate their marriage when they are faced with empty nests; and
- health concerns increase stress for aging couples, but there is a gender gap in how they react.
While the emotional impact of divorce for couples over age 50 remains significant, the financial implications of gray divorce can be even more complex.
Retirement and Investments
Later in life, most married couples’ largest assets are their retirement accounts, such as 401(k)s, IRAs, pensions, and other long-term investments. Dividing these requires careful planning to comply with legal requirements and avoid unnecessary tax consequences. For many, this process defines their financial situation for their next decades.
In a divorce, 401(k) accounts are divided through the execution of a qualified domestic relations order (QDRO), which provides the nonparticipating spouse a portion of the 401(k) assets, according to Kiplinger. It can be done tax-free if rolled into an IRA or 401(k).
An IRA is not an employer-sponsored plan and is not subject to ERISA, meaning, a QDRO is not required for dividing an IRA. The division of an IRA is handled through what is referred to as a “transfer incident to divorce,” meaning that the transfer of funds from one spouse’s IRA to the other’s is outlined in the divorce decree or property settlement agreement.
Additionally, individuals are entitled to Social Security benefits from their ex-spouse if they were married at least 10 years and can claim their own Social Security benefit or half their ex-spouse’s benefit, if greater.
Long-Term Support
Longer marriages often mean longer-term spousal support. Courts consider factors like earning capacity, health, and contributions made during the marriage. Unlike younger divorces, gray divorces may involve support arrangements that last for years or decades.
Specifically, if one spouse has substantially more assets or earnings than the other, the ex-spouse may be entitled to periodic support payments. Further, if equitable division of assets is difficult or creates a significant tax liability, spousal support can be used as a technique to provide a fair resolution when dividing assets. In addition, current tax law makes spousal support nondeductible to the individual paying it, and nontaxable to the recipient.
Family Dynamics
Second marriages, adult children, and step-families create additional considerations. Estate planning, wills, beneficiary designations, and inheritance expectations all may need to be reviewed and updated. In addition, durable power of attorney for financial matters, revocable or irrevocable trusts and any other relevant financial assets also bear updating.
Protect Your Assets
Gray divorce requires a clear, practical approach from both a matrimonial and trusts and estates law angle. Protecting retirement assets and addressing complex family long-term dynamics are essential. Legal guidance ensures that both parties can navigate this transition with clarity and security, and look forward to the best possible future for all parties moving forward.
Working with an experienced matrimonial or trusts and estates law attorney can help guide you through your financial decisions related to “gray divorce.” If you need a matrimonial law or trusts and estates attorney, contact us and speak with an attorney today by calling (888) 968-8271 to explore your options and protect your future.
As Senior Counsel at Tully Rinckey, Marlee Stever, Esq., provides legal counsel in the areas of estate planning, trust administration, probate administration, guardianships, conservatorships, and estate tax matters. With a robust background in crafting comprehensive estate plans, Marlee focuses on developing strategies that protect clients’ assets and ensure financial stability for future generations.
Jillian R. Falt, Esq., an Associate in the firm’s White Plains office, handles a diverse array of family and matrimonial law matters. Her family law practice includes pre- and post-nuptial agreements, separation agreements, equitable distribution, spousal support, child support, post-judgment modifications and enforcement, family offense matters, and child custody and access. She represents clients in all aspects of settlement, litigation and the negotiation and drafting of agreements.
Visit www.tullylegal.com for more information.
