Gray divorce requires special handling

Divorce is a difficult transition no matter when it happens, but it can be especially difficult when the couple has been married for a long time. Known as “gray divorce,” a separation between people nearing or past retirement can be especially tricky.

The trickiest part may be money. Who gets how much? How are IRAs, retirement funds, property and possessions divvied up to be fair to both spouses? The answer is never easy when finances are entangled.

That’s why the first step after an older couple decides to divorce is to begin to unentangle their financials.


Both parties should collect financial documents including car registration, retirement account statements, insurance documents, bank and credit card statements, tax returns for the past three years and any supporting documents.

Financial experts suggest you, your lawyer or your financial advisor conduct a credit check on both yourself and your spouse to make sure you are aware of all outstanding debts. As the saying goes: Trust but verify.

Both spouses should consider the future tax implications of being separated. Being single means filing tax returns as a single filer rather than married. This will halve your standard deduction and could send you into a higher tax bracket. Therefore, it may be in your best interest to have one spouse keep pre-tax retirement accounts such as IRAs while the other keeps property that can be taxed.

Pension, Social Security, life insurance

Pension plans are community property so both spouses can potentially access monthly payments or any lump-sum payouts both at the time of the divorce and in the future. This, of course, is a matter that should be clearly negotiated during the divorce settlement.

Social Security payments are not community property but people who have been married for longer than 10 years can receive benefits on an ex-spouse’s account under certain circumstances.

Only the life insurance policy holder can access the policy’s cash value. Also, the lower income earner may want to hold a life insurance policy on the other earner to protect future support payments.

Remember, divorce proceedings can take at minimum nine to 12 months and sometimes more than two years or more. Child support and spousal support might not be immediately forthcoming. Foreseeable expenses such as a child’s education, home repairs and health care need to be considered during negotiations.

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