The Rise of the “Gray Divorce”
What you need to know about the growing trend of divorce over 50 – the special issues, potential complications, and financial implications.
Would it surprise you to learn that the largest segment of the population getting divorced in the last decade or so are those over 50? There are a number of reasons for the growing “Gray Divorce” trend including: the sheer population of the baby boomer generation; people getting married later and thus divorcing later; a higher rate of second, third, fourth marriages which are more likely to end in divorce; and people living longer and wanting to spend their golden years being happy rather than staying in a relationship that is no longer working.
As a result, there are some special issues that arise in a gray divorce, or are more prevalent than in a divorce between younger couples. These issues have significant and lasting financial implications.
- More Assets and/or Valuable Assets to be Divided: Because the parties are older, many have accumulated more assets during their lifetimes. They may have a marital residence, a vacation home and possibly some rental property. They may also have valuable art and antiques, boats, automobiles, wine and/or other collections among the types of assets that need to be divided.
- More Complex Assets to be Divided: In addition to having more assets, some may be more complicated. For instance, one or both parties may have a privately-owned business which needs to be valued. If one of the parties is a highly-compensated employee of a large organization, there may be stock options, restricted stock, and other types of deferred compensation that may need to be valued or otherwise taken into consideration in dividing the assets.
- Issues of Alimony or Spousal Support: Is there going to be a need for alimony/spousal support or is it possible that the income from the assets distributed to each of the parties during the divorce will be sufficient to maintain the supported spouse’s lifestyle? For example:
- If there is a need for alimony, there is a question as to the duration of the support award. This can vary significantly depending upon the facts and circumstances of each matter and the laws of the state in which the divorce was filed. Duration is an issue especially if the payor spouse is close to retirement age.
- Does the payor spouse have the right to retire? What are the laws of your state in that regard? What if the parties had planned for years that the payor spouse would take an early retirement? How does that play into it?
- In addition, if there is an award of spousal support, is there a need to secure that award with life insurance on the payor spouse? If so, is there sufficient life insurance already in place that can be utilized for that purpose or is it possible that additional insurance is needed? And if so, is the payor spouse insurable at this point?
- Emancipated Children: There may be emancipated children (either of this marriage and/or from a previous marriage). Although the children may be emancipated, one or both parties may have been providing support which can often be a contentious issue. Will such support be continued? If so, who is going to pay? Is this something on which the parties agree or are there disagreements which may cause one or more children to side with a particular parent?
- Trusts Set up During the Marriage: What happens if there are trusts in place? Depending upon the laws of a particular state, the disclosure of what exactly is held in those trusts may be problematic. There are a number of very sensitive issues which can potentially be involved – I’ll cover those in a future blog article.
- Estate Planning Strategy Change: Similarly, there may have been significant estate planning that has been done which may now need to change based upon the change in circumstances of the parties.
- Health Coverage Issues: If one spouse has been out of the workforce and is not expected to rejoin, what are the health coverage options until he or she reaches the age at which they are eligible for Medicare? Is COBRA coverage available? If so, for what period? (It’s often available for 36 months depending upon the relevant facts and circumstances.) What is the projected cost of COBRA coverage? What other alternatives may be available and what are the costs?
MPI, a prestigious national consulting firm founded in 1939, specializes in business valuation, forensic accounting, litigation support and corporate advisory work. MPI provides fairness opinions, sell-side and buy-side advisory services through its investment banking affiliate MPI Securities, Inc. MPI conducts every project as if it is going to face the highest level of scrutiny, and its senior professionals have extensive experience presenting and defending work product in front of financial statement auditors, management teams, corporate boards and fiduciaries, the IRS, other government agencies, and in various courts.