Gray divorce is on the rise, and couples parting ways at this stage of life should know there are important financial and estate planning issues to consider.
In the last five years, more long-term marriages have ended than ever before. It’s a global phenomenon. Most divorces still happen to couples in their 30s and 40s, but more couples in their 50s and 60s – who have been married 25 years or more – are deciding to split up.
Their concerns are different than younger couples who divorce. In a more typical divorce, partners are concerned with young kids – assuming there are any – being alright. In gray divorce, partners have accumulated substantial assets, so there’s more to be divided. There are older kids, possibly grandchildren. There are more stakeholders.
Sometimes, it’s becoming an empty nester that’s the impetus for the split. The kids are 18 or over and gone. And the couple finds they’ve grown apart. Sometimes it’s the children who – maybe even unwittingly – have kept their parents together.
No matter what age the kids or grandchildren are, they still need to be taken into consideration.
In gray divorces, there can be a lot of intertwined interests that need to be unraveled and divided, such as vacation homes, rental properties, a family business, etc. For anyone considering getting out of a long-term marriage, here are a few things to keep in mind.
Divide and conquer
Have you and your soon-to-be-ex shared the same financial advisor, estate planning attorney, or accountant? Probably. Now, you each must have your own set of advisors. It’s cleaner and easier for one spouse to stick with the existing advisors – and for one spouse to get new ones. Plus, ethically speaking an advisor can’t serve each of you.
Consolidate and conquer
If the couple is retired, they have likely already consolidated their nest egg, which makes divorce and splitting up assets easier. If they haven’t done this yet, doing so will again make it easier. If the couple hasn’t done that yet, it can be part of the negotiations.
Who will pay for the wedding(s) of your child or children? That’s often part of divorce negotiations. It’s cleaner to get this settled at the time of uncoupling, rather than waiting much later.
Also, any previous estate planning documents that left everything to the surviving spouse may need to be updated with a new beneficiary or beneficiaries. If I’m the adult child of divorcing parents, it’s clear to me that whatever my inheritance originally was going to be, it may now be diluted.
Power of attorney
Splitting spouses were probably each other’s power of attorney and healthcare power of attorney. Now what? The responsibility – for one or both parents – may now go to an adult child. These are conversations you’ll need to have at the time of the split.
If you get remarried, you will want prenups. A prenup gives you – and your adult children and grandchildren – some measure of security. You’ll also want to update any health insurance and life insurance policies. You may again need to update your power of attorney and healthcare power of attorney – just as you did when you were divorced, but this time appointing your new spouse.
When you get married, there are a lot of inherent and invisible rights and responsibilities. You may want to spell out legally that your children are not financially responsible for their stepmother or stepfather, should they require long-term care. This is where estate planning and financial planning come into play as well.
Don’t leave your nest egg or your children’s or grandchildren’s futures to fate. Plan ahead and have peace of mind.