“Gray Divorce” – Special Considerations if You’re Divorcing Over 50

The United States has one of the highest divorce rates in the world.  However, there has been a sustained and modest decline overall in the rate of divorce over the past four decades, with the most marked differences occurring amongst young adults, middle-aged adults, and older adults.  Divorce rates for young adults are declining while the divorce rate is increasing among middle-aged adults and adults over the age of 50.  “Gray divorce,” a term first used by Susan L. Brown, co-director of the National Center for Family and Marriage Research refers to divorces involving adults age 50 or older.  Brown’s research found the increase in divorce rates for adults over the age of 50 from 1970 to 1990 was fairly modest, doubling by 2010, and continues to climb.  Brown’s statistics show that 36% of divorcing adults in the United States are aged 50 or older. According to Brown, “well over a third of people who are getting divorced are now over the age of 50.” 

While all divorces present emotional and economic challenges, the Gray Divorce presents its own unique financial and emotional challenges.   Due to the parties’ ages, their abilities to recover financially present different economic issues depending upon the status of the parties’ journeys in life. The below examples are, of course, generalities but illustrate financial problems faced in different decades of life. 

The Fifties 

When couples are in their 50s, they have reached the point where their children have either graduated or soon will, graduate high school.  What impact will the divorce have upon planning for and paying the children’s college tuition and expenses?  Parties can, of course, write into their marital termination agreement how they wish to allocate the cost of their children’s college expenses.  This becomes more difficult when the parties can’t agree on an amount and need to go to court to have a judge make a decision on this issue.  Some states have laws that give the divorce court authority to allocate college expenses between the parents.  So, if the parents don’t reach an agreement, the court will impose its own orders on them for the payment of college expenses.  Some states permit a court to modify ongoing spousal support orders to take into consideration that one parent is seeking assistance from the other to pay the college expenses.  Other states do not permit the court to issue any that consider the children’s college expenses. 

Regardless of the law in any particular jurisdiction, parents are still faced with the practical problem of living in two households, paying for college and trying to determine at what level (if any) can they contribute to their retirement accounts.  These parties may be forced to consider whether their share of the proceeds from the family residence should be used towards the purchase of another residence of the funding investments they can rely upon their retirement. 

The Sixties 

Couples in their 60’s are looking forward to their imminent retirement.  Their planning took in the total retirement stream to support them in one household.  Now, that income stream will have to be divided in half to support their two households.  This may mean that some people will feel they will need to continue working and delay their retirement.  They, too, will have to decide whether the house sales proceeds will need to be invested in liquid assets rather than real estate. 

The Seventies 

These couples are already retired.  They may have small mortgages or none at all.  This very late in life Gray Divorce essentially gives septuagenarians no time at all to make contingency plans regarding their retirements which are no longer a future goal.  They actually are retired.  There is a greater risk of needing short or long-term care.  This group is required by federal law to take required minimum distributions from their retirement accounts which they have are subject to ordinary income tax and then used to pay daily expenses.  The ability to recover economically is limited. 

Spousal Support Concerns 

California law deems any marriage of ten or more years a presumptively long-term marriage for purposes of ordering spousal support.  Spousal support is at issue in a long-term marriage, as the court will retain jurisdiction over the amount and duration of spousal support after the divorce (as opposed to limiting support to the fairly standard guideline of “one-half the length of the marriage”).  The amount and duration of support is extremely important where one party was a stay-at-home spouse or where there is a disparity in income between the spouses.  Typically, the spouse who would be ordered to pay support seeks to argue that the other spouse can work and be self-supporting or can earn income at a certain level. When older couples divorce, that argument may be more difficult, as the supported spouse may have been out of the workforce for decades and additional education and training would not necessarily mean that he/she would be able to find employment assuming that employers (while prohibited from discriminating on the basis of age) are less likely to prefer a candidate that is in his/her fifties or older.  

The supported spouse cannot automatically rely on spousal support as a means of economic security, however, since retirement age looms on the horizon for both spouses.  A retired spouse is very unlikely to be ordered to pay spousal support from his/her Social Security income.  It is possible that a court could order support payable from a deferred benefit program, pension, or other retirement, assuming that the interest in that asset is not already subject to division as community property.  

Retirement Assets 

California is a community property state and under the Family Code the Court must divide the community property of the parties.  The community interest in retirement assets such as Individual Retirement Accounts (IRAs, SEP IRAs, Roth IRAs, etc.), 401(k)s, pension plans, and deferred compensation is subject to division in a divorce proceeding.  Typically, the community interest is calculated using a formula based on the amount of payments made into the asset, the length of the marriage, and the date of separation.  The method for dividing such assets is typically an Order from the Court, usually in the form of a Qualified Domestic Relations Order or Domestic Relations Order (often abbreviated as QDRO/DRO).  This Order instructs the plan how to calculate the community interest, how to divide it, directs the payments to the spouses, and addresses any survivorship interests.  With IRAs and 401(k)s the third-party financial service that manages these assets will require a Court Order specifying the division of the asset, and then the recipient spouse has the option of taking his or her share as a payout (subject to taxes and penalties), or rolling it over into a new IRA.  Most financial institutions require not only the Court Order but for the parties to fill out their forms with instructions and information on the cashout or rollover.  Under IRS regulations, a transfer into a new IRA of a portion or all of the asset incident to a divorce does not trigger tax penalties.  As with all retirement accounts, there will still be penalties and taxes for early withdrawals – although some exceptions do apply. 

Often, divorced spouses put off doing the required paperwork to roll over IRAs/401(k) interests or obtaining the QDRO/DRO for a pension or deferred compensation plan and serving it on the plan.  This can lead to issues later on when they finally realize they need to have completed these steps before being able to withdraw or receive payments. Attention should be spent on getting the assets divided correctly and all required paperwork done as soon as possible.   

Other Financial Issues 

Division of other assets could be complicated if one spouse used separate property to acquire an asset or assets during the marriage, as documentary evidence is often required.  As time passes, it becomes more difficult to reach back to old escrow companies and banks to obtain documents from years ago. Banks typically will not provide records further back than seven years, even in response to a direct Subpoena for records.  Valuation of assets as of the date of marriage or other points in the marriage can be complicated and contentious if there are no documents from that actual time period, as the parties will likely have to rely on the opinion of a retained expert to perform that calculation and analysis.  If there were transactions in/out of accounts with separate property money and community money, or real property was acquired and/or principal was paid down using separate property and community money, certain calculations need to be done to determine the community property interest (this is usually done by a forensic accountant).  Again, some of the calculations that are needed, or the need to trace the history of financial transactions, may be hindered by the passage of time hindering the ability to obtain documentary evidence.   

Older adults are more likely to have concerns about maintaining life insurance policies, long-term care insurance and health insurance coverage.  A savvy California Family Law practitioner will have the experience and expertise to obtain orders or craft terms of a Judgment that will address these concerns.  

In some situations, the toughest asset division involves items of sentimental value.  A couple married for decades may have acquired items during their marriage such that the emotional attachment can exceed the economic value.  These items have included china, silver sets, family photo albums, religious mementos and ceremonial items, artwork, even camping gear and certain furnishings.  There is often no black-and-white rule for the division of such items outside of assigning an economic value, and most Courts are going to be reluctant to opine on the division of such items.  For this, experienced Family Law attorneys need to guide the parties on ways to reach an agreement, and if necessary, even involve a mediator to assist.    

Emotional Issues Relating to the Gray Divorce 

                People of any age can suffer emotionally when getting divorced.  Yet, as with financial issues, the Gray Divorce brings its own set of emotional issues.  Sadness stemming from remorse over decisions made over a period of 30 years is not uncommon.  Suddenly becoming single at 50 after a 25-year marriage is not the same as becoming single at 30 after a 5-year marriage.  Any older person who has entered the dating pool at 50 or over will tell you that.  Being faced with having a new sexual partner after decades of marriage to one person can be frightening.  Some senior citizens may feel anxiety over their body images; having only been intimate with their spouse during marriage.  Getting divorced when you are a grandparent is a different experience than getting divorced when you have young children.  The adult children have established new family units.  Different family dynamics are at play with sons and daughters-in-law and their extended family.  What happens when it’s your adult child’s turn to have Thanksgiving at his or her home?  Will both you and your ex-spouse be able to attend these types of family functions separately?     And, if you can’t, what can be done about celebrating the holidays so that you feel comfortable?  Will there be issues in the future attending the weddings of adult children and grandchildren?  A person’s normal support circle can be impacted.  People may decide they need to attend a different site for their religious services if they feel uncomfortable or anxious seeing their ex-spouse at the family’s regular house of worship.  Relationships with different couples with whom one socialized can be impacted, causing a sense of isolation.  These are all issues that may need to be explored.  This may be the time to consider finding a therapist, counselor or group therapy to address these issues.   

Re-Prioritizing And Re-Ordering Retirement Planning

                Recognize that retirement planning for two separate people as they move forward in life as opposed to retirement planning for one marital unit is paramount. It is important for parties to work together to maximize the amount of assets they will have collectively and individually to achieve modified retirement goals.   It is also important to realize that extensive litigation only diminishes the value of the estate people have worked hard for decades to amass so they can enjoy their retirement. Expectations must change when planning for the retirement of two separate, rather than one, economic unit. Working with an experienced California family law attorney at Cage & Miles, LLP as well as other experts can make this achievable.