Over the past 25 years or so, judges, attorneys and others have noticed a growing trend of people who are getting divorced later in life. Some call this phenomenon “grey divorce,” and define it as any divorce involving people over age 50. However, many of these divorces involve people older than that. According to some sources, 10% of American divorces involve people over 65.
In many ways, a gray divorce is like any divorce among younger people. However, these divorces can be more complicated when it comes to dividing the marital property. What’s more, the division of property can have profound consequences for people who are close to retirement age, or who have already retired.
Retirement accounts and pensions
Retirement accounts are crucial to the financial wellbeing of older Americans, and may be among the most valuable assets they own. They are also, in most cases, subject to property division in divorce. This can be a complicated matter.
Under North Carolina law, a divorcing couple must divide all their marital property in a way that is “equitable,” meaning “fair.” For the most part, anything acquired during the marriage is considered marital property. However, a retirement account may be partially subject to property division in divorce even if one spouse owned it before the divorce. This is because, if the value of the account rose during the marriage, that added value is likely considered part of the marital property.
Divorcing spouses may require a special court order in order to divide a 401(k) and similar accounts. IRAs don’t require the same court order, but it’s important to handle dividing them correctly in order to avoid taxes and other penalties.
Similarly, one spouse’s pension may be subject to property division in divorce. The details of this division can vary depending on the fine print in the pension plan itself, as well as according to complex state laws.
Social Security benefits
Social Security retirement benefits can also be crucial to the finances of older Americans, and they can also be affected by divorce.
If both spouses are retired and receiving Social Security when they divorce, one ex may have the right to a portion of the other’s retirement benefits. This applies in cases involving a marriage that lasted for more than 10 years if one spouse’s benefit amount is higher than the other’s, and if the lower-benefit spouse is over 62 years old and has not remarried.
More considerations
A gray divorce can upend a well-crafted estate plan, as well as many other preparations for retirement and beyond. It’s a good idea for those who are considering a late-in-life divorce to consult with experienced professionals to learn about ways to protect themselves and their finances.