Five Unique Challenges of a “Gray Divorce”

older couple sitting on a bench If you are over the age of 55 and have decided that it’s time to finally end our marriage, you are not alone. In fact, you are part of the gray divorce boom. Even as divorce rates across the United States decline, your age group is bucking the trend. Baby boomers are now divorcing at the highest rates in U.S. history, with a divorce rate that’s tripled from 1990 to 2017.  And then sit back and think about all the societal and economic implications from such a great increase in divorce rates for people over 65 — Wow!)

Divorce might offer you the liberation you’ve been craving, but older couples also face unique divorce challenges. When you’ve been together for a long time, decoupling can get a little complicated. Here are five issues that can be extra tricky for divorcing baby boomers:

1. Identifying Pre-Martial Assets

A big part of the divorce process entails separating your shared martial assets. Step one in that process is identifying which assets are part of your marriage estate and which assets are pre-martial possessions. This would be pretty easy if you had only married your spouse two or three years ago, but after several decades of being together, memories tend to blur together.

For example, you may struggle to remember which pieces of jewelry you owned before your marriage. In other cases, pre-marital assets can get mixed into marital assets, such as if your husband used money in his pre-marriage savings account to buy your house after you were married. Does that money still belong to him, or is it now part of your shared asset?

2. Finding All Marital Assets

A young, broke couple won’t need to work too hard to identify and divide up their few assets. Older couples, however, have had decades to build up a complex portfolio of savings, investments, and asset holdings. Additionally, you and your spouse may be in your prime earning years. That might mean you’ll have to determine the value of unique assets, such as:

  • Bonuses
  • Stock options
  • Ownership stakes
  • Rental properties
  • Executive compensation packages
  • Travel perks
  • Car allowances
  • Credit card miles
  • Patents

As you start your divorce process, make sure you collect as much paperwork and documentation as possible so that you can identify every asset you and your spouse own.

3. Social Security

Retirement is on the horizon or may already be here! If you and your spouse have been married for more than ten years, even after divorce you may be able to take advantage of his Social Security history. If your individual Social Security history is less than half of your spouse’s, then you can opt to receive a benefit equal to half the amount of his. This will NOT affect his benefits; but rather simply increase how much you receive. This is true even if he remarries.

Many divorcing couples don’t think about this in divorce, so make sure to keep it in mind, especially if you’re close to that 10-year anniversary.

4. Inheritances

Older adults are more likely than younger spouses to have lost both parents, which could result in receiving an inheritance. Inheritances are not martial property, but again, things can quickly get complicated when money from an inheritance is used to purchase marital assets. What if you received $500,000 from your parents’ estate and put that money toward the cost of your dream home, which you and your spouse purchased with savings and with the inheritance?

Here’s another potential pickle: if your spouse received $3 million from his unmarried brother who passed away, is it really fair when you split your shared assets 50/50 and he comes away with his half of your marital estate AND the $3 million? A big inheritance can change the dynamic of a divorce settlement and affect what “feels” fair rather than what the law says is fair.

5. Retirement Accounts and Pensions

By this time in your life, your retirement account will (hopefully) be pretty substantial. Dividing a retirement account can be tricky, and will require extra paperwork, including a Qualified Domestic Relations Order (QDRO). The administrator of your husband’s plan will also have to get involved, and you’ll need to decide whether you want to roll your share of your spouse’s 401(k) into your retirement account, keep the money in his account until you retire, or take out a lump sum payment within a special penalty-free window.

Pensions are even trickier than 401(k) accounts, especially if you or your spouse isn’t yet retired. How can you make sure you get your share of your spouse’s pension, and what will happen to your pension if your spouse demands a cut?

These are all difficult questions, and if your marital estate is complex, it probably isn’t a good idea to do a divorce on your own. Seek competent advice to help you identify marital assets and premarital assets, determine a fair divorce settlement, and figure out how to divide even your most complex assets.

If you are considering a “Gray Divorce” (or a divorce at any age),  collaborative divorce may be the perfect option for you.  End your marriage in a peaceful, respectful manner with a team of professionals that will guide you through all aspects of divorce, including your finances, without going to court.

Not quite ready to call us?  Attend a Divorce Options Workshop and get your questions answered in person the First Saturday of every month!


Ginita Wall, CPA, CDFA, CFP®
Treasurer of Collaborative Practice San Diego


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