‘Gray divorce’ cases raise new financial questions for their attorneys.
A recent Bowling Green University study reported that an astonishing 25% of all new divorce cases filed are by those age 55 and older. Is this the result of changing attitudes towards marriage and monogamy amongst the so-called “Baby Boomer” generation?
Regardless of the reason, family law practitioners need to sharpen the tools in their toolbox to handle some of the particular financial issues affecting gray divorce.
The first consideration that bears looking at in a new light relates to Social Security income. John, for example is entitled to receive $2,600 per month at his age 66. Mary, a stay-at-home mom, will receive half of John’s benefit ($1,300) at her age 66 – John still keeps his full $2,600. As long as a divorced couple was married at least 10 years, each spouse is entitled to 100% of their own Social Security benefit or 50% of their spouse’s, whichever is greater. In most states, within the context of divorce, Social Security is viewed purely as an entitlement, not an asset of either party.
For an aging couple, however, Social Security income can be a substantial portion of their combined income. Attorneys in gray divorce should be considering equalization of Social Security income between the parties in the form of permanent alimony.
In fact, another component of gray divorce is viewing the alimony equation differently. There is an assumption in most jurisdictions that alimony will cease at a “normal retirement age.” However, as life expectancies lengthen, many people continue to work well past the age of 70. In addition, in gray divorce, a necessary budget item for both parties might include long-term care policy premiums, as well as any payments towards Medicare supplemental health insurance policies. When working with older clients, it is essential to address future health care and longevity concerns.
Perhaps the most complex issue is how gray divorce will affect the next generation. Do the parties own a family business? How does gray divorce (and perhaps subsequent re-marriage) affect the anticipated transfer of wealth to the next generation? In the past, the golden years were a time when spouses anticipated taking care of each other. Going forward, if a 60-year-old client is divorced and in bad health, how does that impact their grown children? Who will handle the financial and physical responsibilities of their divorced parents and how can that be addressed within the overall settlement?
This is just the tip of the iceberg; required minimum distributions, tax issues and pensions already in payout status are other significant financial concerns affecting gray divorce. To find out more about how Divorce Solutions and certified divorce financial advisors can help your clients, call today at 248-354-0495.