Divorce in the golden years: what does it mean financially?
With couples such as Maria Shriver and Arnold Schwarzenegger facing divorce after twenty-five years of marriage, and Al and Tipper Gore ending their marriage after forty years together, the U.S. is facing a trend in older couples divorcing. In fact, while the number of divorces nationwide has declined slightly over the last twenty years, the number of divorces among couples age 50 and up has doubled.
Divorces for older people have different ramifications than divorces for younger couples. While younger couples may be concerned about the interest of their children, child custody and support matters, those 50 and up generally have different concerns; such as finances, division of retirement assets, inheritance and business issues.
Finances, in particular, can be tricky when dealing with divorces among older couples. One problem stems from valuing retirement funds. When calculating the value of tax-deferred retirement funds, such as 401(k) accounts, what is termed the "true value" of these accounts should be considered. When money is withdrawn from these types of accounts, taxes must be paid. The value to be considered when splitting these assets then, is the amount the account will be worth after the taxes have been paid on it.
One common mistake of many divorced women is cashing in the ex-husband's retirement accounts. These account assets are usually taxed as income and charged an additional 10 percent penalty if withdrawn prior to the age of 59-1/2. As much as 50 percent of the account can end up going to taxes and penalties in these cases.
Experienced divorce lawyers who understand these common issues of pension valuation and tax penalties for withdrawal work with clients to ensure a fair division of retirement assets.
Alimony is another common area for concern for older divorcees, as the possibility of the paying spouse dying while the receiving spouse still needs the money is very real. One way to solve this problem is for the spouse receiving the alimony to take out a life insurance policy on the ex-spouse.
A spouse may also be entitled to receive Social Security benefits of the former spouse, depending upon how long they were married among other factors. Spouses should check with the Social Security Administration because Social Security benefits should be considered when determining the value of assets to be split.
Finally, all debt should be split equally between the spouses; and it is wise to obtain a credit report to ensure that all debt is considered in the equation.
The divorce of those over 50 can be difficult to recover from financially, so it is important that each spouse take proper precautions to protect their financial interests.
The attorneys at Hale Ball can also assist with other needed changes that come with divorce, including name change. This includes both traditional legal marriages and common law marriages. If you need legal assistance for your divorce, contact us today.
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