DIVORCE BEFORE OR DURING RETIREMENT
The rate of divorce among those over the age of 55 is increasing dramatically, having doubled since 1990. While the number of those getting re-married later in life is increasing, those in second marriages are also 2½ times more likely to get divorced. While all divorces bring their own challenges, getting divorced in the later stages of a career or after retirement raise specific issues that need to be considered.
The primary concern for those divorcing later in life is how their retirement plans will be impacted as a result of having to divide retirement assets as well as incur new living expenses such as establishing a separate residence.
If you have spent time out of the workforce, you may be eligible to claim Social Security retirement benefits using your former spouse’s work record provided you meet certain requirements. First, you must have been married for over 10 years. Second, your anticipated benefits based on your work record must be lower than those using your ex-spouse’s record. Third, you must be over age 62 and unmarried. Fourthly, your ex-spouse must meet the eligibility requirements to claim Social Security benefits.
While many couples divorcing later in life are leaving long-term marriages, and so meeting the 10 year requirement, those same couples are more likely to remarry. That will prevent the re-marrying spouse from claiming Social Security on the ex-spouse’s work record.
2. Retirement Assets
When dividing retirement assets such as pensions, 401(k) or 403(b) plans, a Qualified Domestic Relations Order (QDRO) is needed. This type of Order permits the retirement assets to be divided between the titled spouse (the spouse that owns the retirement asset) and the non-titled spouse (the spouse that doesn’t own the asset) without incurring a penalty.
Attention needs to be paid to pre-retirement and survivor death benefits. Pre-retirement death benefits are paid to the non-titled spouse if the titled spouse dies before retiring. Survivor benefits are paid to the non-titled spouse if the titled spouse dies first after retirement. If these benefits are not specifically addressed in a Separation Agreement or the Judgment of Divorce, then the retirement plan cannot make these important benefits available to the non-titled spouse. Without these benefits being addressed, the non-titled spouse will lose this significant asset upon the death of the titled spouse.
Another factor to be considered is that only one beneficiary can be named for pre-retirement and survivor benefits. This can impact those looking to re-marry after a long-term marriage, as the beneficiary cannot be changed to a new spouse.
Clever planning through insurance can replicate these same benefits, potentially for a lower long-term cost, so this could be an option to discuss with your insurance provider.
The law in New York provides a formula for calculating the presumptive amount of maintenance based on both spouses’ incomes. For those over the age of 55, “income” can become more complicated than in earlier career stages, with stock options, car allowance, travel and vacation benefits and more being included within an overall compensation package.
Another concern is whether the payment of maintenance will delay the retirement date of the payor spouse. It should be argued that the maintenance to be paid will be replaced by Social Security and distributions from retirement assets upon retirement, in order to limit the duration of maintenance to prevent any potential delay in retirement.
4.Distribution of Marital Assets
Similarly to maintenance, compensation packages for those in the later stages of careers can complicate the distribution of marital assets. For instance, stock options granted to a spouse by his or her employer for past performance at or around the commencement of the divorce are treated differently than those granted to encourage future endeavors. Many of those divorcing over the age of 55 are business owners, partners, or others who share in the equity of the companies for which they work. Dividing these ownership interests can create several issues that require professional representation to address appropriately.
While custody of children is not often an issue in divorces later in life, divorce can still create an emotional toll on grown children that may need to be addressed. Family therapy can often help facilitate a conversation to resolve issues arising from a divorce or from a new relationship. Even if your children are reluctant to be involved in therapy, you may gain valuable insight into how to discuss or address any issues during a time of instability.
Relationships after divorce are becoming increasingly common at all stages of life, with many leading to new marriages. If you are entering into a new marriage and have significant assets, a pre-nuptial agreement should be considered to ensure those assets are addressed appropriately.
Whatever your situation, you should consult with an experienced estate planning attorney to discuss how best to protect yourself and your loved ones following a divorce at any stage of life. A divorce will nullify any election you may have made to administer a will or trust, while you may also want to change who you have appointed in a Power of Attorney or through a Health Care Proxy.
This is not intended to be legal advice. You should contact an attorney for your specific situation.
Martin S. Butcher, Senior CounselMartin Butcher is senior counsel with the firm and practices Family, and Matrimonial. He can be reached by phone at 866-303-9595 toll free or 845-764-9656 and by email.[/column]