En español | Getting a divorce at any age has emotional implications, but getting a divorce after 50 comes with the added burden of unique financial challenges. Odds are your accumulated assets, from real estate to investment accounts, are substantial and intertwined. Perhaps your debts are, too. Add to this looming retirement, and it becomes clear why it's trickier to end a marriage after the age of 50. Family attorney Janice Green, author of Divorce After 50: Your Guide to the Unique Legal & Financial Challenges, offers answers to common questions confronting couples going through a late-life divorce.
1. What makes a late-life divorce different from one in an earlier decade?
Less time to recover financially. That fact alone influences many aspects of the divorce. The property division now focuses on analyzing assets for postdivorce income potential and knowing the age-related attributes of assets that can add intrinsic value.
Take the marital home as an example. Over and above the fair market value of a home, it may have intrinsic value later in life: exemptions from property tax increases at specific ages; a potential source of income through reverse mortgages at 62; rental income potential (from a room or the entire property); exemptions when qualifying for public benefits, such as Medicaid.
2. What is the most common mistake people make in their divorce, financially speaking?
They fail to think about the value of a mixed, balanced portfolio. Often, a spouse will focus on receiving one particular asset and not pay attention to what else may be on the table. Aiming for a balanced, or mixed, portfolio can be as relevant in the divorce context as it is for non-divorce retirement planning.
For example, Wife wants to keep the house no matter what, and this may be an emotional decision. She puts all her eggs in one basket. She agrees to let Husband have his retirement in exchange for the house. She may also agree to pay Husband, in the future, a sum of money for a portion of his interest in the house equity. Then the real estate market takes a serious downturn. She can find herself upside down — owing more to the primary mortgage and to her ex-Husband than the house is currently worth. Her ex-Husband's note comes due, and she has no option but to sell the house. She's able to use the sale proceeds to pay off the mortgage, but she still owes money to her ex-Husband — and has no other property to cushion the market downturn and her retirement years.
Depending on the type of assets in a marital estate, it may be wise to consider sharing the risk and take a percentage of multiple assets. Over time, through upturns and downturns in the various markets, a more conservative joint ownership of assets may make sense when the spouses' personalities are conducive to doing so.