Lindabury, McCormick, Estabrook & Cooper, P.C. Firm News & Events
A recent New York Times article discussed the increasing national trend of older couples divorcing. In New Jersey, as well as nationally, “Grey Divorces” are becoming more common and, as a result, more socially acceptable. Over the last 15 years there has been a marked increase in the number of individuals over the age of 50 who are divorcing their spouse and for individuals over the age of 65, the divorce rate increase has been even greater.
For the majority of older individuals many of the more common divorce issues no longer remain. Issues such as child custody, time-sharing, child support and those surrounding the raising of children have all been resolved. Rather, for senior couples preparing to divorce the issues of alimony and equitable distribution remain vitally important along with a myriad of other related late-life divorce questions.
Below I have outlined some of the major considerations that should be examined by older couples who intend to divorce.
Your Home
In divorce cases where the parties jointly own the marital home, the three most common dispositions with respect to the property are: (1) the husband buys out the wife’s interest; (2) the wife buys out the husband’s interest; or (3) the property is listed for sale and sold to a third-party. While these three options remain in “grey” divorces, you often have the additional issue of whether or not one or both spouses find the marital home beyond their means or needs and wish to downsize.
Also present in “grey divorces” is the emotional consideration of leaving a home which, in many cases, is where the spouses have spent their entire married life. Whatever choice is made, it needs to be made within the context of both financial and estate planning for the future.
Some litigants (over the age of 62) in “grey divorces”, when deciding on the disposition of the marital home and it’s equity, consider the use of some form of a reverse mortgage. This allows you to convert part of the equity in your home into cash without having to sell your home or pay additional monthly bills. But this requires serious examination before going forward.
Social Security
Many spouses involved in the “grey divorce” are concerned about how it may affect their entitlement to Social Security benefits. There are several determining factors affecting eligibility. The first requirement is that your marriage must have lasted for a minimum of 10 years. Interestingly, it does not matter if your “ex” has since remarried. You are still eligible for benefits. However if you remarry, an issue arises for you. In order to be eligible to collect a divorced-spouse benefit, you must currently be single. If you did remarry, that subsequent marriage must have ended as well. If it has you are able to collect Social Security benefits on either spouse. You can receive whichever benefit is higher, but you are prohibited from collecting on both.
The next requirement is that you must be at least 62 years old. Lastly, the benefit you would receive is based on your own employment history and must be less that the benefit you would receive based on your former spouse’s record.
It is important to remember that these are merely the basic qualification factors. There are timing considerations as to when to elect to receive your benefit which can be particular to each individual.
Retirement Accounts
Retirement accounts such as pension plans, 401(k) plans and Individual Retirement Accounts (IRAs) are treated as marital property in a divorce, at least the portion which was earned during the marriage. The financial concerns involved in a “grey divorce” are often more complex and burdensome. The procedures by which retirement accounts are divided can depend on a number of issues. Federal guidelines that control how 401(k) plans can be divided and distributed, while the division and distribution of Individual Retirement Accounts are generally governed by state law.
The division of pension / retirement accounts generally require the preparation and filing of a Qualified Domestic Relations Order or “QDRO” (pronounced Quadro). A QDRO is a court Order signed by a judge and sent to the Plan Administrator to distribute the benefit or account in accordance with the terms of the QDRO.
Health Insurance
A spouse who relies on his or her spouse for their medical insurance coverage must consider the fact that they will no longer be covered under their spouse’s insurance once their divorce is finalized. Post-divorce, these single, older individuals, need to remain mindful and consider the increased cost for their health insurance. This is particularly important for someone under the age of Medicare eligibility which is generally age 65. To determine the cost for Medicare coverage, a divorcing spouse can refer to: www.medicare.gov/eligibilitypremiumcalc
Post Divorce Estate Planning Is Essential
Once the divorce is finalized, it is imperative to update your estate plan. Failure to do so may have your assets, at the time of your death, distributed in ways contrary to your wishes. Not doing so can also potentially have a portion of your estate go to your ex-spouse.
Several immediate steps should be taken including:
- First, revoke your will and make a new one. This will allow you to leave your property to the people you choose.
- Second, designate an executor to wrap up your estate when the time comes.
- Next is to update or change your beneficiary designations. While your will is important, it may not cover all of your valuable assets. Many assets “pass outside of a will”, directly to beneficiaries previously named on paperwork provided to a bank or insurance company. Some examples where beneficiary designations may need to be updated are:
- Individual Retirement Accounts
- 401(k) Accounts
- Life insurance policies
- Pay-on-death (P.O.D.) bank accounts
- Transfer-on-death brokerage accounts
In addition to the above, questions regarding estate planning, the creation or administration of trusts, elder law issues concerning long term care, entitlement to and the calculation of Social Security benefits, and often the valuation and division or succession of a long-held family business come front and center to the discussion.
Lindabury’s Family Law group works closely with the attorneys in the firm’s Wills, Trusts & Estates practice to ensure our divorce clients are provided the legal guidance necessary to protect themselves and their assets once their divorce has been finalized. Lindabury’s full service approach to assisting clients addresses the long term protection needed after a divorce and helps to ensure a smooth transition to the next phase of life.