It is crucial that spouses divorcing late in life manage their assets and win fair settlements to support the increased expenses of retiring independently.
It is becoming more common for married couples in Livermore, California, to decide to divorce later in life, after the children are grown and when retirement is drawing near. The number of couples seeking divorce after age 50 doubled from 1990 to 2010, when one-quarter of all newly divorced people were in this age group. Divorce at this later stage in life can be necessary, but it can also create substantial financial burdens.
Careful planning and counsel can help reduce those burdens. However, it is critical that older California couples considering a "gray divorce" understand the challenges ahead.
A costly setback
Divorce can be difficult financially at any age. Besides covering the costs of the divorce proceedings, spouses must absorb the enhanced costs of living alone. According to USA Today, on a per-person basis, spouses may pay anywhere from 30 to 50 percent more while living independently than they would while living together. Older people may feel the impact of these changes even more than younger people.
People who are 50 or older typically face rising health care costs and limited working years. For people in this age group, finding funds to cover two retirements rather than one can be a challenge. Besides the cost of maintaining separate households, these couples must factor in several other retirement expenses that will increase after the divorce, such as maintaining a personal vehicle, visiting other family members and, potentially, paying for assisted care.
To ensure financial solvency during retirement, people who divorce later in life have a few different options, according to USA Today:
- Continue or resume working and delay retirement to rebuild savings.
- Downsize and plan for a more frugal retirement.
- Reduce the amount of money left behind to heirs.
Navigating the divorce properly can also help a spouse protect his or her interests afterward. Most spouses can benefit from discussing retirement plans with a financial planner and then working with an attorney to ensure that assets are divided fairly during the divorce process.
California property division
Some spouses may not seek property they are entitled to due to a poor understanding of state laws. California follows community property laws when dividing property, so property and debts obtained by either spouse during the marriage belong equally to each spouse.
California law treats complex property, such as pension plans and other retirement benefits, as community property, provided that the benefits were earned during the marriage. If a spouse contributed to a retirement fund before and during the marriage, however, the fund is considered commingled property, or a mixture of community and separate property. Commingled property usually must be divided by court order.
Dividing assets such as retirement benefits can be complicated even when those assets are not commingled; retirement plans such as pensions, for example, should only be divided with a Qualified Domestic Relations Order. This makes it essential for spouses to seek guidance before the divorce and assistance throughout the settlement process.
Anyone preparing for a gray divorce in California should meet with an attorney to improve the likelihood of a fair settlement that will help support an independent retirement.
Keywords: divorce, retirement, assets