When you Divorce Later in Life
July 7th, 2016
In a perfect world, splitting the assets of a marriage would be a relatively pleasant and somewhat uncomplicated process.
Unfortunately, this is rarely the case. More often than not, this process becomes even more difficult when a couple decides to divorce later in life. The longer a couple is married, the more assets they tend to accumulate. In fact, couples who have been married a long time tend to share ownership of pretty much everything.
Prenuptials or Postnuptials
Also, unless the couple married later in life, the odds of having a prenuptial or postnuptial agreement may be slim to none. Few couples enter into marriage with an eye to unwinding it later, especially couples who married young and may have brought only student loan debt to the relationship. When in place, however, these legal agreements can be very helpful in clarifying the ownership of specific assets.
Third Party Mediators
Although more financially savvy couples may be able to sort things out on their own, many find the use of an impartial third party helpful. Such a party can work with the legal and financial professionals of the couple to ensure that all of the assets are properly identified, valued and titled. Another advantage of a third party is that it removes much of the emotion associated with the assets.
Deal with Debt
Hidden debt can be a nasty surprise at any time, but more so when a couple divorces. Not surprisingly, financial incompatibility is one of the commonly cited divorce triggers. If you live in a community property state, then you may be responsible for one-half of the marital debt – even if the debt is not yours. In non-community property states, you can still be responsible if you and your spouse share credit cards or have joint loans. As soon as possible, get a full credit report to help uncover hidden debts prior to asset negotiations.
After the marital property is legally divided and the final court decree issued, the ex-spouses need to make it a high priority to review and, if need be, amend their estate planning documents. First and foremost you will want to update your health care directive without delay. Then, update your power of attorney for financial matters, will and trust to reflect your new status. Remember to retitle the assets according to the court order. In addition, if real estate is to be taken out of joint ownership to become the sole property of one spouse, then be sure appropriate deeds are drafted, signed and recorded.
One aspect of estate planning cannot be repeated too often – keep your beneficiary designations current! For example, say your will leaves everything to your children in equal shares. However, if your life insurance designates one of your children as the beneficiary, then that designation defeats the terms of your will. When it comes to retirement plans, things can get even dicier. If your ex-spouse is still the primary beneficiary of your ERISA retirement plan when you pass on, then he or she will inherit it even if state law says no. This has been settled law since the United States Supreme Court decision in Egelhoff v. Egelhoff, 121 U.S. 1322 (2001).
This has been a brief overview of a rather complex subject and important topic. Obtain experienced legal, financial and accounting advice.