Divorce at any age poses financial challenges for both spouses, not only in the depletion of savings during the division of marital assets, but also the drop in standard of living once each has established their own livings quarters. For older couples, however, the risk is much greater, as the financial reserves from a lifetime of pooled resources are halved just as they are going into retirement.
Grey divorce is a growing demographic. Back in the 1990’s, one in ten older couples split. That trend is now one in four, with the expectation that the rate may continue to rise.
Regardless of the reasons, if you are thinking of divorce, it is important to be prepared not only for the effect it will have on your financial health, but also future long-term care plans, your estate plan and any adult children who may also have families. For Virginia residents, being prepared involves having informed advice on how to ensure your financial security moving forward.
What financial sources should I be concerned about?
Outside of the emotional upheaval of divorce, there are significant financial hurdles that spouses going through grey divorce must be aware of in order to get an idea of what their lives will look like post-divorce. Although Virginia is an equitable division state in which the court decides on a fair division of marital assets, when it comes to pensions and Social Security, the primary breadwinner may not feel it is fair at all when the judge rules on the division of these assets.
The court will often view the pension of one spouse as a joint asset to be split evenly, with equal amounts divided between the spouse’s bank accounts. This will also be the case for retirement benefit funds, as accumulated wealth during the marriage is part of the marital assets.
Although premarital property remains untouched, couples who have spent an adult lifetime together may have significantly commingled assets that they each owned before marriage, which complicates the division of marital property. Unless the divorce is amicable, it will likely be the judge who will decide on these matters.
Both health and life insurance coverages may negatively impact the nonworking spouse after divorce. The spouse who was covered under the other’s policy will no longer have health insurance unless the couple discusses options for continued benefits. The spouse holding a life insurance policy may remove the beneficiary designation before divorce, making it impossible for the other spouse to make a claim as they could post-divorce.
For older couples, careful consideration of these and other concerns is important when embarking on such a momentous life change.