Mistakes to Avoid When Divorcing Over 50
Did you know that divorce rates in the United States are declining? That is, divorce rates are declining in the United States except for those who are over 50 years of age. Just a few decades ago, only one in ten spouses who split was over the age of 50, but today one in four spouses splitting up is over the age of 50.
The numbers represent a massive surge in breakups late in life. It could be due to people living longer and having more opportunities to grow – or grow apart from their significant other. When the children move out of the family home, some couples find that their marriages depended on their presence. Additionally, there are more working women and financially independent women. Many of the working women are even out-earning their spouses. This removes the financial imperative to maintain a marriage. Lastly, societal standards are changing, and there is less stigma associated with divorce and living single.
Divorcing Over 50: Avoid Common Mistakes
- Failing to Inventory Assets: In many cases, one spouse has a far better understanding of the overall finances than the other. Before attempting to file for divorce, take an inventory of all assets, including what’s in your bank accounts, retirement accounts, life insurance policies, etc.
- Hanging onto the Family House: Once the division of property is complete, one spouse or the other may end up in possession of the family home. In this situation, consider carefully whether the best plan is to keep the property. There may be emotional ties, and it may feel like a refuge. It may seem like a lot of hassle to pack up and move, especially if there are still children living at home. But keeping the house may be a poor financial decision. Before you decide to stay in the family home, think about the mortgage, the costs of maintaining the property, any associated taxes, etc. in terms of your post-divorce budget
- Not Knowing Amount of Debt Owed: In some relationships, one couple knows more about the finances than the other; including the amount of debt owed. Remember that when you get divorced, you have responsible for half of the total debt accumulated during your marriage, even if it isn’t in your name. Obtain a credit report, including yourself and your spouse, so you are not surprised by the amount owed.
- Ignoring Tax Implications: A fair number of the financial choices made during a divorce come with tax consequences. When you decide if you want your alimony monthly or as a lump sum, consider the tax consequences. When you need to determine if it’s better to have the retirement plan or the brokerage account, consider the tax consequences. When you are thinking about selling the house or keeping it, think about the taxes associated with both plans.
- Ignoring the Need for Health Insurance: If your spouse’s health insurance policy has always covered you, you may be surprised at how expensive it will be to obtain health insurance on your own. Look into your options early so you can have a plan in place that is feasible.
- Mishandling Retirement Funds in the Divorce Settlement: Some older divorcees roll their ex’s retirement account into an IRA. If you fund your IRA with your share of your ex’s retirement account balance then tap into it before you are 59.5 years old, there is a 10% early withdrawal penalty. Instead, consider protecting the assets with a qualified domestic relations order (GDRO). The QDRO allows you to make a one-time withdrawal from your ex’s retirement account without paying the standard withdrawal penalty.
Divorce can be devastating no matter your age, but divorcing after 50 carries a higher risk of financial loss due to established retirement accounts, and limited time to recoup any financial loss. Save yourself as much financial difficulty as possible by working with an experienced family law attorney who can guide you through the California divorce process. Call The Maggio Law Firm today.
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