Financial Hazards of Divorce After 50

For anyone nearing or over 50, these financial issues will be crucial. If you have any additional questions, contact your divorce attorney.

By Jeanie Ahn

August 15, 2014 2:58 PM

Yahoo Finance

Breaking up is hard to do no matter when it happens. But getting divorced later in life can be especially traumatic, both emotionally and financially.

There are now more divorcées over the age of 50 than ever before. In 1990, just one in 10 people who got divorced was over 50; today, it’s one in four, according to “The Gray Divorce Revolution,” an analysis of federal statistics conducted by researchers at Bowling Green State University.

For this age group, some of the biggest challenges include divvying up accumulated assets and learning how to take control of their finances, often for the first time.

More than 600,000 Americans 50 and older got divorced in 2010, compared to about 200,000 in 1990.

Certified estate planner Jean Ann Dorrell says getting a divorce later in life requires dealing with situations that you don’t have to think about when you’re younger: Who gets the house? How will retirement plans get split? How will a divorce impact your future Social Security benefits?

Here are her tips on how to handle the most challenging money issues in a later-in-life divorce:

1.      Avoid tax penalties when splitting up assets

2.      Real estate: Who gets the house?

3.      Be knowledgeable about debt

4.      Plan for gaps in health insurance

5.      Social Security benefits

1. Avoid tax penalties when splitting up assets
Longer-married couples have typically built up substantial savings in several retirement plans. And unless a careful analysis is done, important provisions and the value of various retirement plans may be overlooked.

To split up some assets, a divorcing couple will need a Qualified Domestic Relations Order (QDRO) issued by a judge, which changes or splits up the ownership of a retirement plan to give a divorced spouse his or her share of the asset. QDROs should protect both spouses from tax penalties when retirement funds are transferred from one to another. 

2. Real estate: Who gets the house?
The house is often a source of emotional attachment — for both husband and wife — with neither wanting to give it up. But financial factors — like continuing to pay off the mortgage if there is one and upkeep — should be considered when it comes to this asset. It may make more sense to sell the house, pull out the equity and buy something smaller, Dorrell says. Or consider a reverse mortgage to make it financially possible to keep the house.

3. Be knowledgeable about debt
Full disclosure about all debts and assets is crucial. The best thing you can do is get a credit report on both of you. Credit reports are updated regularly, so it would be good to keep checking on it before the divorce is finalized. Your divorce attorney should be able to help give each spouse the other’s debt information and make a plan to get the debt taken care of, Dorrell says.

4. Plan for gaps in health insurance
If you are currently covered by your spouse’s health insurance through a family policy, you may face a gap in coverage until Medicare kicks in at age 65. One option is to purchase coverage through the health insurance marketplace; since the passage of the Affordable Care Act, insurers are not allowed to charge higher rates for people with pre-existing conditions, and subsidies can make insurance even more affordable. Another option is COBRA, a continuation of your employer’s group plan for up to 36 months; with COBRA you can receive the same coverage you had when you were married, but it is expensive. Perhaps a last-resort option, Dorrell says, is to consider legal separation instead of a divorce if neither of those alternatives are affordable.

5. Social Security benefits
It’s important for divorcing couples to remember that you can collect your ex-spouse’s Social Security benefits. If your marriage lasted 10 years or more and you're 62 or older, you can collect retirement benefits on your former spouse's Social Security record (if you’re unmarried), and it won’t impact your former spouse's benefits, Dorrell says.

You may be eligible to draw benefits of up to 50% of your former spouse's benefit. Check out the Social Security Administration’s website for more information about filing for benefits if you’re divorced. 

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[This article has been slightly shortened. To read the full piece go to Divorce After 50.]

Peace ~

Linda

Separated But In Divorce Limbo

Making the final decision to file for divorce comes very slowly in some situations.  One spouse may initiate the separation; the other goes alone because there doesn’t seem to be a choice; sometimes, one leaves while the other spends years thinking they'll get back together. So won't move forward.

But this lives-on-hold situation can be physically and emotionally unhealthy. In fact, limbo is such unsettled territory, that often one or both spouses continue to feel their lives are simply dangling in midair. 

Here are a few ways to create a healthier limbo:

ATTORNEY: Spend an hour talking to a divorce lawyer about the rules of marital separation in your area. Does moving out of the marital home constitute abandonment? If you leave the children in the care of your spouse, will it affect your future custody agreement? Simply ask how any actions you take now could have a bearing on your future life if you eventually get a divorce. Be overly cautious now rather than wish at some point in the future that you had been!

FAMILY: Spend social time with your family – at least with those whose company you enjoy! Avoid the ones who can’t refrain from quizzing you and/or constantly telling you what you should do. You need a break from that. If you have children, spend pleasant, happy time with them, whether you’re living with them or not.

FRIENDS: If you have long time friends who won’t take sides and who can be both respectful of your privacy and fun company, spend time with them on shared interests, old and new.

NEW FRIENDS: Meet new people and develop new friendships. Those who only know you, the new you, won’t remind you of what was or what may come to be. They only know the you of right now. Spend time getting to know the ones who make you feel good about yourself and life in general. 

OH, THOSE WEEKENDS: Some separated and divorced people really hate being at home on weekend evenings – others don’t. If you feel down at those times, make it a point to plan a shared, fun activity for at least one of those nights every weekend.

* In economically tough times, make it a group challenge to come up with free or very cheap fun so no one will be left out. Free concerts and plays at universities, workshops and seminars at churches and other religious settings, and community festivals can be great for all involved.

PRACTICAL ACTIONS: Whether you stay married or not, there are a few basic, healthy steps to take now: Open your own checking account; apply for your own credit card (legitimately using full household income on the application); and start a separate cell phone account if you’re currently on a family plan. If you're living separately, keep your accounts and households truly separate. 

In essence, develop your own healthy life – one that doesn’t involve your separate spouse. You aren’t excluding or shunning. You’re simply choosing to be a healthy individual, whatever the life situation.

Peace,

Lin