The challenges of divorce late in life

| May 14, 2021 | Divorce

Divorce at any age poses financial challenges, not only after the marital property is split, but also in a drop in the standard of living of the ex-spouses once they set up separate living accommodations. But for older couples, the financial impact of divorce may be much more substantial, as the financial reserves from a lifetime of combined assets are halved when they are around retirement age.

The overall divorce rate has actually gone down across the country over the past 25 years. But at the same time, divorce among those 50 and older has increased 109%. There are many reasons for this, including changing priorities as couples drift apart, or staying together for the sake of the children, only to split after the kids go to college. The increasing financial independence of women in this age group and the availability of healthcare for divorcing spouses are also factors driving the rise in gray divorce.

Regardless of whether the divorce is amicable or not, it is essential to understand the impact of an older couple’s divorce on the rest of the family, the estate and their individual long-term care plans. For Maryland residents, it is wise to also find a committed legal advocate serving Rockville and Montgomery County who will work to ensure your financial security moving forward.

Asset division late in life

As Maryland is an equitable division state, a judge will look at a number of factors in determining the fair, but not necessarily equal, division of marital property. A couple’s shared assets will most probably include not only the family home with its equity, but also bank accounts, annuities, life insurance policies, IRA’s, Social Security benefits as well as dividends and brokerage accounts.

Along with shared assets is also shared debt. The divorcing couple may have to make choices on whether to liquidate some assets or, regarding life insurance or long-term care policies, offer up cash for the value of the policy. Unfortunately, the tax penalties for early withdrawals from retirement plans can be steep, as well as early withdrawals from annuities or life insurance policies.

The high cost of living separately

Couples who have been together for years can underestimate just how expensive living alone can be, not to mention maintaining their accustomed lifestyle. Expenses for separate accommodations, including mortgage or rent and utilities, as well as paying for their life insurance and health insurance if they are not on Medicare, can eat up savings quickly.

Divorce is expensive at any age, but it can prove to be daunting for older people. It is best to plan as far ahead as possible when making this momentous life change.