While divorce at any age can pose financial problems once the ex-spouses are on their own, older people face unique challenges when they decide to divorce in their twilight years. The divorce rate in America has actually gone down in recent years, decreasing among couples between 25 and 39 by 21%. But the so-called “gray divorces” among Americans 50 and older have gone up by a whopping 109%.
There are many reasons for this trend, such as what happens when two people grow apart. Their priorities may have changed over time, or they may simply be bored with each other. For New York couples, however, it is important to consider the impact that divorce will have on the financial reserves of their combined assets once that property is divided.
Whether the divorce is collaborative or not, it is wise to take into account all that will be impacted by the couple’s decision in terms of their children, grandchildren, healthcare and the estate. It is also important to have an experienced New York City divorce attorney who will advise you on the most effective course of action that will ensure your interests post-divorce.
Dividing assets late in life
New York follows the doctrine of equitable distribution of jointly owned marital property in divorce. For older couples who have been sharing assets, sometimes for a lifetime, this may include not only the family home along with its equity, bank accounts and other property, but also annuities, IRA’s, life insurance policies, Social Security benefits as well as dividends and brokerage accounts.
During division, the spouses may have tough choices to make between liquidating some assets or, regarding life insurance or long-term care policies, offering up cash for the value of the policies.
Making early withdrawals on some assets like a 401(k) will incur tax penalties. Many early withdrawals before age 65 from retirement plans will be subject to a higher tax rate, as well as early withdrawals from annuities of life insurance policies.
The cost of living separately
Couples who have been together for a long time can underestimate how expensive it can be to live alone. They need to decide how to pay for some basic considerations like life insurance, home and living expenses, mortgage or rent, and being able to maintain their lifestyle.
For spouses who did not work during the marriage or who have always been on the other spouse’s life insurance policy, it will be important to come up with an equitable solution for continuing coverage. Medicare and Social Security is also possible to a nonworking spouse based on the former spouse’s record, with conditions.