Getting divorced later in life comes with unique challenges. If you or your spouse have already retired or can see retirement close on the horizon, you will likely have concerns about how to ensure you are financially secure in the golden years of your life. I’ve seen very unhealthy relationships, and it’s sometimes just as heartbreaking to watch that as it is to see them split up…but I understand their fear.
In a “gray divorce,” or one that typically involves people older than 50, dividing assets can get complicated. If you’re facing this situation, you’ll need to work with an experienced divorce attorney/mediator. I also strongly recommend older couples consider using the collaborative divorce process because doing so allows you to work with a team of people–including financial experts–skilled in helping you come to mutually satisfying resolutions rather than leaving the big decisions up to a judge.
Here are just a few of the special considerations and unique challenges you may have to deal with in a gray divorce.
Retirement Accounts, Pensions, and Social Security
Retirement accounts, including 401(k)s and individual retirement accounts (IRAs), are typically considered joint assets even though only one person’s name is on an account. Of course, there are significant tax ramifications if things are not handled correctly, so it’s vital to have a good CPA and financial advisor involved, as well as a knowledgeable California divorce attorney. If one person’s 401(k) is larger than the other person’s, you may need to file a qualified domestic relations order (QDRO) with the court which allows you to specify how the money will be divided. Money will then be transferred from one 401(k) to another one without incurring immediate tax penalties. You don’t need a QDRO to transfer money from one IRA to another, but this is something you should do with the help of the right professionals.
Pensions acquired during marriage are also considered joint assets. If only one party has a pension, the other party will likely be entitled to some of it depending on how many years during the marriage pension money was being earned. This is the same principle generally applied to dividing up the money in retirement accounts. However, dividing up pensions can be a lot more complicated, especially if withdrawals have already started being made.
Social Security benefits and payouts are controlled by law, so there isn’t anything to divide or negotiate. However, I have seen couples take these benefits into consideration when negotiating other monies coming from retirement accounts, pensions, life insurance policies, and other assets.
Lately I’ve seen more and more couples really struggle with situations where only one person has a pension or a retirement account and he or she worked for years–or decades–to earn it. Perhaps one spouse was self-employed, yet the other had a job where they contributed to a 401(k) with a company match. Or maybe one person worked for decades while their spouse stayed home to care for young children. People can get pretty territorial about what they consider to be his or her “own” money and emotions can run high during these discussions.
Being able to work though the total value of all benefits within a supportive collaborative divorce process is absolutely the best way to make sure both parties feel they’re exploring all the possible options to reach an amicable agreement. With a team supporting you in having difficult but productive discussions, you’re far more likely to get past feelings of resentment or being cheated out of what you feel you deserve. The more complicated the financial situation, the more beneficial a collaborative divorce process is likely to be.
This May Sound Like a Joke, But You Can (and Should) Avoid Irritating the Judge
If you’ve been married for a long time and have acquired property and assets over the years, there are some issues that make a traditional court divorce more tedious and stressful. For example, sometimes the transactions are so old that the paper records are gone or have been misplaced. Memory fades, and the two parties recall the details of the acquisition differently, and then they’re faced with the unenviable task of tracking down and locating the original paperwork. What was the original value of that property and under what conditions or agreements were they purchased? So many questions! Judges don’t like dealing with these situations as they are required to make rulings based on reviewing actual “evidence” – documents authenticated by a person who knows the record is true, and has supporting testimony to present.
In many cases, you will need to hire an expert to trace and confirm a paper trail and identify the original value of a property or asset. This is expensive and time consuming, and on top of that, there will also be cross examinations by the opposing person’s attorney. Judges get frustrated as this takes up loads of their time, and both attorneys have to do more preparation. Even when the trial has ended, there is another 90 days before the judge has to make a ruling.
The Collaborative Divorce Process Is Much Better for Dealing with Long-held Assets
The last thing you want in an already expensive, time-consuming, and emotionally charged divorce is to deal with a judge who is losing patience. In a collaborative divorce, there’s no judge who will impose a final decision about a complicated situation, and he won’t be irritated by the process which is a good thing for both you and your spouse! Instead, you can work out trades and negotiations between the two of you, and anything goes as you consider all of your assets. Because it’s just the two of you working things out (with the support of your collaborative team), you can converse comfortably and discuss the history of the purchases and acquisitions, and you can jog one another’s memory. You might even find yourselves sharing a positive experience as you think back on a better time. You can discuss and decide within a wide range of settlement options rather than laying everything before the court in a somewhat adversarial way and then waiting for the judge to hand down a unilateral and final judgment. Trust me, rarely does anyone like all of the judge’s ruling. People often even trade off assets as they figure out spousal support in order to come to a more palatable option.
However, please understand that you will not always get what you want. Sometimes people enter the collaborative process thinking they can negotiate themselves a better deal to the detriment of their spouse. Without a paper trail, they abuse the process, purposefully planning to be dishonest about what they remember, especially if one person handled the money throughout the marriage or has a better memory or a sharper mind for finances. If you have concerns about this, be very open about it with your attorney and consider their advice as you decide how to proceed. The collaborative divorce process has a lot of support built into it, but it’s not necessarily the best solution for every situation–at least not without proper planning and selection of expert team members. The process is built on a commitment of transparency, and if that is not followed, then this may not be the best option for your situation. The attorneys are duty-bound to withdraw from the process of there is a belief that his/her client is being dishonest.
The Bottom Line
Dividing assets in a gray divorce can be a complicated, overwhelming, and emotionally taxing process, but choosing to work with a collaborative divorce team rather than leaving all the financial decisions up to a judge in a traditional court divorce is often the better choice.
Please schedule a confidential consultation with me to discuss your no-court California divorce options. I would love to help you decide if the collaborative process is right for you.
If you would like to meet with our office to review your divorce situation, please reach out to me via JMB@jeannebrowne.com to schedule an appointment.