Underestimating the financial complexity of gray divorces can be costly

It is becoming increasingly common for couples in Rocklin to decide to end their marriages at a mature age. Since 1990, the rate of gray divorce, or divorce after age 50, has doubled in the U.S., and it is only projected to keep rising, according to the New York Times. Gray divorce can offer many benefits, but Californians who are considering it should fully understand the financial issues involved.

High financial stakes

Unlike younger couples, couples who are older than 50 have often accumulated substantial assets, from physical property to retirement savings. Assets such as pension plans, 401(k)s, life insurance policies and stocks may be especially valuable and difficult to divide.

California observes community property laws, which hold that property and debt accrued during the marriage belong equally to each spouse. However, inheritances, gifts and previously owned property are all considered separate. This can make dividing assets that were built up both before and during the marriage, such as retirement accounts, a challenge.

Many spouses do not fully understand their legal rights to this complex community property. Unfortunately, the New York Times notes that spouses who fail to fight for their fair share of property during a gray divorce may forfeit thousands of dollars or more. Older couples often benefit from seeking legal help to ensure a reasonable settlement.

A fair division of property is important because older couples often face substantial financial and related challenges after divorcing. These include:

• Saving for retirement. The Washington Post reports that, on average, divorced older couples only have 20 percent of the wealth that married older couples do. Making up this financial gap before retirement can be difficult.
• Covering caretaking expenses. While married spouses can look after one another to some extent, single people may have to pay for assistive or even live-in care.
• Re-entering the job market or finding self-supporting employment. Spouses who stopped working or gave up career opportunities for the sake of the marriage may have trouble finding new jobs that yield adequate income.

If one spouse is significantly disadvantaged, spousal support may be awarded. Family law courts in California evaluate factors such as the age, health, education, work experience and marketable skills of each spouse to determine whether support should be awarded. According to the New York Times, divorcing spouses often benefit from meeting with a financial planner so that they can understand the coming costs and more accurately represent their needs during court.

Surviving gray divorce

Coming out of a gray divorce with a fair settlement and the ability to stay financially solvent can be challenging, even for spouses who separate on agreeable terms. Under other circumstances, navigating a gray divorce can be even more difficult. Anyone thinking about divorcing at an older age should speak with an attorney as soon as possible to better understand personal rights, potential challenges and likely outcomes.