Are you aware that the age 50 and older divorce rate is the fastest growing segment of divorce filings? Not surprisingly, Baby Boomers are a significant part of that demographic.
Peter Dunn, host of “The Pete the Planner Radio Show,” and I discussed several unique circumstances that exist with Baby Boomers divorcing during a recent “Pete the Planner” segment on WIBC. I also wrote a column about “gray divorce” for The Indiana Lawyer, which you can read here.
Below are a few things to take into account when divorcing later in life.
Dividing retirement assets in a fair and reasonable way is a primary concern. Baby Boomers are likely to have true “pensions” (monthly payments for life) as well as retirement accounts (e.g. 401(k), Individual Retirement Account), and there are tax issues connected with both types of retirement benefits.
Divorce courts may be able to divide the retirement benefits in kind. In other words, the monthly payment and/or the retirement account would be divided between the spouses. Such a division would allow any tax consequence to be apportioned consistent with the division of the benefits.
Starting the Next Life Phase
Divorcing Baby Boomers are often looking at the next phase of their lives. Many are not ready to coast into a life of leisure, for varying reasons. For some, the financial situation does not allow for it; others choose to continue working or become very active in a charitable endeavor. Whatever the reason, divorcing Baby Boomers are looking at their options and at how the division of the marital estate will allow them to transition to that next life phase.
It is also not uncommon for divorced Baby Boomers to begin subsequent committed relationships—remarriage or cohabitation. Premarital agreements should be seriously considered if the person wishes to keep property out of the marital estate and subject to the court’s division. Likewise, a premarital agreement can make sure that the person’s assets go to his or her designated heirs and beneficiaries, instead of being mandated by the law in the event of the person’s death.
If cohabitation is preferred over remarriage, it is wise to enter into a “cohabitation agreement,” or what is commonly now called a “no nup” agreement. A no nup agreement can set out what each person’s rights and obligations are in the relationship, which will help avoid claims based on alleged verbal statements if the relationship ends. That’s right, an oral contract can be the basis for a division of property in the event the relationship sours and they are no longer living together if there is no premarital or cohabitation agreement in place.