Elderly divorce, also known as gray divorce has several key differences from divorce seen with younger couples. Typically, children do not factor into a gray divorce. Children of an elder couple have usually become adults by now – forgoing the need for child support or child custody. Martial homes are considered in the gray divorce just like in any other divorce. What is unique to elderly divorce however is the importance of retirement accounts especially the 401k’s, pensions, and IRAs.
How are retirement accounts divided?
Under a QDRO or Qualified Domestic Relations Order a divorcing couple may choose to divide a 401k 50 – 50 or 60 – 40, however they decide. It becomes more complicated if the receiving spouse decides to withdraw the 401k money instead of putting it into an account – withdrawn money may be subject to taxes. Pensions are also split under a QDRO based on the current payout rate or the estimated future value of the payout rates.
IRA’s are not covered under a QDRO, instead, the terms of an IRA must be settled in the divorce or legal separation agreement. Fees or taxes can occur if money from an IRA is withdrawn or if the normal payouts are split up. Directly transferring money from one IRA to another IRA is a good way to avoid fees or taxes.
What should a divorcing couple be thinking about?
It is important for a divorcing gray couple to understand what benefits they have now and how they can be distributed. A dependent spouse may want more financial support because they are more unlikely to start a new career at an older age. The financially supporting spouse may worry about their ability to keep up support payments as they get older or retire. Divorce, especially gray divorce, is a complex martial issue that requires an extraordinary level of skill and planning to successfully navigate. Having an experienced, knowledgeable attorney at their side may be the best way for an elder spouse to defend their interests.