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Implications of a 'Grey Divorce'

It’s a phenomenon that’s becoming more common. Older couples with decades of marriage behind them discover that they’re no longer compatible and they decide to divorce, a move that can wreak havoc on retirement plans.

That’s why it’s critical to understand the potential repercussions of so-called “gray divorce” so you can be prepared for what’s coming. A few things to do or to keep in mind if you are headed toward a gray divorce include:

1. Take inventory of everything you own – and everything you owe.

In a lengthy marriage, you likely acquired a number of assets. It’s time to take an accounting of them. Run down the list: houses, boats, cars, retirement accounts and anything else of value. Then likewise, make a list of what you owe — mortgage, car payments, credit card debts.

While situations vary, in many marriages the husband handled the finances and even may have had accounts or debts the wife knew nothing about.

2. Understand the implications of pensions.

That pension you earned after decades of toil, and are counting on to see you through retirement, could be divvied up. If one spouse had a solid pension after years work, that pension will most likely be split between the two parties.

3. Realize you may be wrong about what belongs to you.

In a typical divorce, the assets you bring into the marriage usually belong to you, and everything that came after that is subject to being split.

4. Annuities can get complicated.

If you have an annuity, you need to understand its provisions and whether it can be split down the middle. The answer is sometimes yes, sometimes no. Beyond that, there could be fees or penalties associated with splitting it.

5. Keep beneficiary designations up to date.

Beneficiary designations become key when you go through a divorce. Most spouses name each other as beneficiaries, and in some cases you may be required to keep the former spouse as a beneficiary if there are child-support issues. Most of the time, though, you will want to change your beneficiaries. If you neglect to do so, there could be surprises for your heirs when you die since a divorce decree does not trump a beneficiary designation. Your children or a new spouse could learn that your ex-spouse is the one who inherits a valuable asset.

6. Consider establishing a trust.

If after your divorce you enter a second marriage, and you and your new spouse each have children, you may want to consider establishing a trust. Otherwise, if you die first, your new spouse could leave everything to their children, meaning you would have effectively disinherited your own children. A trust can help you avoid that.

All of this may seem overwhelming — and it is — but it’s important to gather as much knowledge as you can to help you better plan for whatever lies ahead.

In many cases, as you work your way through these and other issues, you will find that you need the involvement not just of a divorce attorney or a financial professional, but both.

Each has a different expertise that can benefit you as you navigate your way down the tangled divorce trail in search of a new and inviting path for your life.

Some Information provided by Kiplinger Reports.



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