While the national trend for divorce has declined, the incidence of older individuals getting divorced has increased. There are a number of reasons for this.
First, divorce does not have the same stigma that it did years ago. It is accepted by society, friends and family.
Next, life transitions are more evident as we get older. No longer busy with jobs and children, the empty nesters begin considering what they are going to do with the rest of their lives.
Life expectancies and health has increased. An individual who is 55 today can expect to live another 20 – 30 years. Often, the parties believe this is too much time to spend with someone you have grown apart from.
The up-side for many older people is that divorce gives them the freedom to explore new avenues and interests.
There are several downsides that should be considered as well. There may be loneliness in transitioning to a life without another individual at their side. There may be the loss of friends and social networks due to the split. Finances will be more difficult with 50% of the assets and 50% of the income. And finally, there may be a loss of caregivers when the senior faces health challenges.
The statistics confirm that divorce is actually on the rise for people over the age of 50. This can have a different financial impact upon the parties and particularly upon women.
First, younger couples who divorce have longer to regain their financial footing. While they are splitting all assets and retirement plans in half, they have many years to work upon building their assets back up. Divorce after the age of 60 leaves very little time to recover financially.
Women more often than men, have taken time off during their careers to be stay-at-home moms. While this was a good emotional decision at the time, it means that their incomes lag behind that of their husbands. It also means that their retirement savings are lower.
Since women statistically live longer, it means that they are retired longer. In other words, their retirements cost more. Yet, they have typically saved less for retirement than their husbands. Post-divorce income for a woman may be lower than her ex-husband. It may be more difficult to save the amounts that are necessary to have the retirement that she was looking forward to.
A gray divorce may require the woman to watch her spending more carefully and to live more frugally than her ex-spouse. She must have a budget that realistically plans for living within her means and increasing her savings.
Women who divorce later in life may have to adjust expectations of what a retirement will look like. While married, she may have looked forward to travel, rest and relaxation. On a single income, much of this may be curtailed.
When younger couples divorce, it is likely that there can be child custody and support issues. There often is less in the way of assets to divide. Often, it is the division of debt.
For the grey divorce, it comes after years of working and accumulating, together. There are special considerations.
Division of Assets. While each of you will be entitled to fifty percent of the total of your marital estate, not all assets are created equal. If you are not dividing each individual asset, but are instead dividing the value of the overall marital estate, it is important to keep tax considerations in mind.
A portfolio of stocks can have long term capital gain issues. Were the stocks purchased at a substantially lower price? The individual who takes this stock will take the purchase price basis. When he or she sells, the capital gains will be due.
Retirement funds. First, there are specialized orders that must be entered by the court in addition to the Final Order of Divorce. These are called QDRO’s and EDRO’s. This specialized order can divide an IRA, 401K, 403B, or SEP. All monies in these plans are pre-tax dollars. As they are withdrawn, income tax will have to be paid Therefore, $50,000 in a savings account and $50,000 in an IRA do not have exactly the same value. This must be considered when dividing the assets.
Social Security Issues. It is not possible to have the Social Security Administration issue checks as part of a divorce. It is, however, important to know the rules by which Social Security is paid. For a long term marriage, it is possible after a divorce, that a spouse may actually have more income by taking 50% of his/her spouse’s monthly benefit as opposed to 100% of his/her own.
It is important to keep these unique issues in mind when going through a gray divorce.
Generally, for a long term marriage, the marital assets will be divided 50/50. Premarital property acquired prior to the marriage as well as inheritances will not be divided if they were not comingled.
Debt will in all likelihood be divided equally as well.
This can change if there was a prenuptial agreement that was signed prior to the marriage.
Since older established couples may have accumulated more wealth than their younger counterparts, it is important to accurately value the assets and to know the tax consequences that are lurking behind every asset. Not all assets can be treated the same. Some have built in capital gains. Others do not. This impacts the value to you.
Division of Real Estate
As with other financial assets, real estate has hidden tax consequences that can impact the value to you. The family home is usually the first place that you will start. While you may want to keep the family home as it represents security to you, it is important to realistically evaluate whether you can afford to keep it. Can you afford the taxes, maintenance, and utilities? What will you have to give up in order to keep this asset.
Does the home have a mortgage? If it does, will you qualify on the basis of your assets and income to handle the mortgage outright?
Are there other properties that you jointly own? Are they mortgaged or owned outright? Should these be sold to generate cash, or are you going to split them up? Again, as with the marital home, there are costs associated with maintaining real estate that should be realistically viewed.
For vacation properties, there will be built in capital gains to take into consideration.
Inheritances and Gifts
Generally speaking, inheritances and gifts received by one party can remain his or her own property outside of the division. This is true only if the property was not comingled with other assets. Did you keep these assets in your own name alone? If it is gifted property, is it clear that it was a gift only to you and not to you and your spouse as a couple?
There will be many items of personal property to divide. Some may be valuable or sentimental, others are not. It is an emotional time, and it is difficult to have perspective on the division of these items. While it may be worth fighting about an heirloom or work of art, you should carefully consider whether it is worth the costs and attorney fees to fight over the dishes.
In every household, different responsibilities are routinely handled by one spouse or the other. This division of labor makes it easier to accomplish all the tasks that are required. Also, we usually try to take over the jobs that we enjoy (or dislike less).
One spouse will always take out the trash or cut the grass. The other will prepare most of the meals or do the gardening. One spouse drops off the kids to daycare, while the other picks the kids up.
The same is true with financial matters. One or the other spouse is usually responsible for all of the bill payments and investing matters. Some people don’t like handling financial matters, while some may have a knack for it. This works well until there is a crisis.
That’s why I recommend cross-training. I’m not suggesting that the jobs be switched, but it is important that both spouses know what is going on financially in the family.
At a minimum each spouse should know who holds the mortgage to the house, approximately how much the mortgage payment is, what the property taxes are and what the monthly utilities are. Additionally, both should know how much is in savings and checking as well as in all of the retirement accounts. Both should know who the accountant is that prepares the annual income tax returns and both should know who the financial advisor is.
This is very important to avoid a catastrophic effect when one person is disabled or dies. I have observed many circumstances where the widow or widower is totally unprepared to handle their own finances alone. He or she has no idea at all as to what the bills are and how they are paid. It is difficult to learn this new task when you are in the middle of a crisis or in shock from a sudden death.
While an estate planning attorney can assist you with the preparation of Durable Power of Attorneys for financial and legal matters, that power will not be effective nor helpful if you have no idea what needs to be paid or where it needs to be paid to.
When you are looking at estate planning and planning for your future needs, remember to do some cross-training. It will make you both ready for whatever the future holds.
When we complete an estate plan – one of the components is a Power of Attorney for Health Care. While we may need an advocate to assist us in getting better from a severe illness or accident, it may also involve the end of life.
Not everyone makes the same choice. Some would like to live as long as possible and use every medical available. Others do not choose that road.
The following is an article about Norma – a 90 year old woman who decided to forego cancer treatment in order to go on the trip of a lifetime around the United States.
The end of her life will come more quickly – but it will be lived with gusto.
The number one problem I see with regard to estate planning is that people don’t do it. Why is that?
Many feel that they do not own enough “stuff” to warrant an estate plan. Others cannot make the hard decisions and so they put it off. Some are simply unable to come to terms with their own mortality – they just cannot confront the fact that one day they will not be here anymore. There are those that were raised not to talk about these kind of things.
All of these are normal thoughts that many others just like you have. These are not the reason to put this important planning issue on the back burner any longer. Don’t let these excuses be the reason to put this off any longer.
If you are young with small children, you need at a minimum a Will, Durable Power of Attorney and Patient Advocate Designation. While you may not have very many assets, your Will is the only place that you can nominate the individual that would be the guardian and conservator of your children if you died. While it is not the ordinary course for young parents to both die, it does happen. Don’t leave your children without the protection of a qualified individual to care for them. You are the one that knows best about this. Don’t leave it for a Probate Judge to try to figure out.
While young, you could also become disabled. Without a Durable Power of Attorney and Patient Advocate Designation, your family would have to go to Probate Court to have a Guardian and Conservator appointed for you. In the meantime, your medical care would be guided by doctors and nurses who do not know what your thoughts are about medical treatment. The process is costly – both economically and time-wise. Be prepared. Have these documents completed.
Some couples have difficulty when it comes to dividing up their estate or appointing their agents. This is understandable. If you cannot agree, you can each put down what you want. While this is not ideal, it is better than having no documents at all. If you do not have a Will, your property will be distributed according to the laws of the state you are living in. You may agree with that, or not.
Remember also that these documents can be amended and changed over time. You are not stuck forever with today’s choices. As your opinions change, you can change your documents to reflect your new thinking.
All of us need estate plans. We need to plan for the future – for the good and for the bad. When you have finished this task, you will feel a weight lifted from your shoulders as you know that you have taken care of your family for a future in which you are not there.
When do we need to do estate plans? Today. Get it done. Get it off of your bucket list.
As I researched the issues concerning funerals and burials in Michigan, I found an interesting history.
Until the time of the Civil War, burials in America were all “green” funerals. When an individual died, his or her family washed and dressed the body. It was usually laid out upon a table or in a homemade wooden casket in the home parlor which was kept cool.
After receiving visitation from family, friends, and neighbors, there was a simple funeral. The body was often buried upon the individual’s own land if he or she lived in the country. If the individual was a city dweller, it was done in a city cemetery. There were no metal caskets, no vaults and no embalming.
During times of war, those who were killed in battle were buried by their fellow soldiers near where they were killed. The family simply received a notification that their loved one had died in battle.
Then came the Civil War. Many of the soldiers, from the North and the South, were from affluent families. They wanted their sons to come home for burial. The transportation of the bodies was slow and the bodies deteriorated before they could arrive home.
In order to diminish the body’s deterioration, the bodies were embalmed. This preserved the bodies sufficiently to permit them to be shipped home for interment.
The custom of embalming took hold in America when President Abraham Lincoln was assassinated. His widow, Mary Todd Lincoln, wanted him embalmed to preserve his looks. His body was taken around the country prior to burial. America was impressed with the lifelike appearance of the body after embalming.
In the United States and Canada, embalming has been the standard for over one hundred years. It should be noted that this practice is not common in Europe, England, or the rest of the world.
For some, not of the options that have been previously outlined are quite right. Some prefer a purely and totally natural option. This has given rise to the “green” funeral and burial.
For some individuals, the concern with chemicals leeching into the ground and the “unnatural” aspect of preserving remains is at odds with the cycle of nature. They would prefer to become one with the ground, providing nutrients for the plants and trees above them. The goal is to limit the environmental impact of the entire funeral process.
In Michigan, a funeral director must sign the death certificate and oversee the transportation of the deceased to the cemetery. The family may, especially if the individual died at home, wash and prepare the body as was done in the old days. It may also be necessary to take steps to chill the body to slow decomposition. While this may seems to many today as an uncomfortable task, there is much written by those who have done this for loved ones. They have found it comforting and it has assisted them in having closure.
A green burial involves being interred in a biodegradable container such as unfinished wood, cardboard, a wicker basket or none at all. The body itself would be placed into cotton clothing or a shroud. All materials must be natural.
Some opt for no container, being wrapped in a shroud and simply lowered directly into the ground. Again, for some, this is not a comfortable conclusion for the body of a loved one. For others, there is peace and satisfaction in knowing that they are becoming one with the earth.
For those who have opted to be cremated first, there are biodegradable urns which are designed to degrade and minimize the impact upon the environment.
If you have opted to be buried upon your own property, as was outlined earlier, your family may conduct its own service and lower your body into the ground.
Additionally, there are, in Michigan, “green” cemeteries. One is here in Northern Michigan on Old Mission Peninsula. A gravesite can be purchased from Peninsula Township.