September 1, 2013
Many older couples stay married because they are on a fixed income and it's just not financially feasible for them to split up and have two separate households. But in cases where they DO want to get divorced, it can be a struggle to determine how they can afford it. Even if one or both spouses are still working, clients who are close to or at retirement age face some unique issues and challenges.
Declining health is one of the biggest issues of older clients. The divorce process is made more difficult if one or both spouses have a serious illness or some kind of disability, or even some kind of dementia. It is difficult to discuss the issues of divorce including splitting assets and figuring alimony with an elderly individual who cannot process all of the information.
If your client has cognitive issues, find out if he or she has signed a Power of Attorney. Many times this power is with the other spouse, and obviously in a divorce we do not want the other spouse making decisions for our client. If the client is legally incapacitated to make decisions then the court can not only appoint someone to handle that person's affairs, but also appoint someone to make decisions for that person in the divorce action.
Elder abuse is an important topic. We typically think of the spouse when we think of abuse. But it could also be a member of their family, and that can be a little tricky. It can be difficult to figure out if the family members are really concerned about the elderly person or more concerned about their own pocketbook. You may need to bring in someone to help make sure that the correct geriatric assessments are being made and address all the needs in a package for the client.
Many times when people retire they have no additional earned income and don't have enough assets to retire on. They live their whole life thinking, "Were going to retire at age sixty-five and we're going to have fun, and travel, and not work anymore because we're tired of working." It's very difficult to convince them that they may not have enough to retire on. It's difficult for them to really grasp the concept that expenses and inflation and lifestyle just doesn't match up with their retirement assets. That's why it's so important for the Financial Divorce Professional to show with their charts and graphs the financial result of income vs. expenses. This is a real eye-opener for client.
It is important to remember that Social Security is NOT an asset subject to division. You cannot divide a Social Security account in a divorce action. What is the role of the Social Security income stream in a divorce? First, even though Social Security is not divisible as an asset itself it is an economic circumstance that can be considered in the division of the other assets. If one spouse is in pay status on Social Security and the other spouse was not, that could have an impact on how the underlying property assets are divided.
The other place that Social Security comes in to play is in support. A spouse is entitled to receive the greater of their own Social Security benefit or one-half of their ex-spouse’s benefit (as long as they were married for 10 years.) This could impact the need for support. In addition, if both spouses are in full pay status and the husband is getting much more income than the wife, and it is their only stream of income, one could see that an alimony order might get entered, moving some of that Social Security (after being received) from one party to the other.
Many times the husband agrees to pay alimony to his ex-wife until he retires, and then he decides to retire early. However judges often say that they feel that people do not have the right to retire early just to get out of paying alimony. If the husband becomes retired due to a disability, the alimony is going to end because he unable to go back to work. But if he is able to work then a judge might say, "You're still healthy and I know you'd like to retire, but I'm going to stipulate income based on whatever you were earning before. You figure out how to come up with the alimony."
“Gray divorces” have doubled over the past two decades,* posing new issues and challenges such as the ones mentioned above. Working with a Certified Divorce Financial Professional can help your client navigate the divorce and transition into retirement with financial security.
*“The Gray Divorce Revolution: Rising Divorce among Middle-aged and Older Adults, 1990-2010”, National Center for Family & Marriage Research Working Paper Series WP-12-04 March 2013