Saturday, December 24, 2011

When Baby Boomers Get Divorced

From my personal experience of being a divorce attorney, I have noticed that perhaps more than 50% of my clients have been around the Baby Boomer age.  Meaning, a number of my clients are already retired, or close to retirement, and are involved in a divorce proceeding. 

Recently Abrams and Festerman posted an article discussing this new trend, which you can find here:

Here are some highlights:

Now [baby boomers] are pioneering a new trend in matrimonial law - the "gray divorce," the phenomenon of couples divorcing after the age of 50.  
Several cultural changes have contributed to the baby boomers generating high rates of late-life divorce. In the past 20 years, gender roles have shifted significantly, and women have become increasingly less financially dependent on men. According to a recent survey by the American Association for Retired Persons (AARP), women over 50 now initiate two-thirds of divorce proceedings.  
Furthermore, boomers entering their retirement years are healthier than any previous generation and are projected to have longer life expectancies. As such, experts have observed a growing desire for fulfillment in the later years, as well as an inclination to leave a dispassionate marriage. Additionally, as the children of boomers enter adulthood, parents are less concerned about the impact of divorce on their offspring and are more likely to exit the marriage without worries about custody, child support and the effects of divorce on young children.
People who divorce later in life have had more time to accumulate assets and debts, which can be significant in a remarriage and subsequent divorce. Access to pensions, retirement account balances and Social Security benefits must be considered.  
Marriages and divorces later in life come with their fair share of financial ramifications. Later-in-life divorces can be problematic because individuals' future earning potentials are typically limited. When combined with the possibility of costly health problems, individuals may be unable to maintain the status quo of the lifestyle they enjoyed as married couples, and older couples may have a harder time adjusting their personal habits and money management styles.
New York is an equitable distribution state; accordingly, the marital assets and liabilities ("marital property") are divided in an equitable fashion, meaning that the marital property will be divided in such a way that fairly represents the parties' respective contributions to the marriage. In the context of negotiating a settlement agreement, it is important to consider all the assets that are subject to distribution. Parties may decide to trade off passive assets or negotiate percentages of various active assets, such as a business or professional practice, and courts typically look to indirect contributions - for example, from a homemaker spouse - in order to determine the proper percentages.  As for credit cards post-divorce, each party should remember to remove the former spouse from any credit card account held in his or her name to prevent the former spouse from incurring additional debt.
The amount of maintenance, if any, is generally determined by balancing the payor spouse's ability to pay with the payee spouse's reasonable needs. Additionally, it is imperative to secure any financial obligation. While life insurance may be cost prohibitive depending upon age and health, it is possible to secure payments through mortgages, confessions of judgment and other security devices. 
In today's troubled real estate market, the marital residence may not have retained its prior value and may remain unsold for a long period of time. Dividing the remaining equity (net proceeds) may not provide the husband or wife with enough financial wherewithal to obtain adequate separate housing.
Pensions and retirement plans are considered marital assets; typically, the amount that was earned during the marriage will be subject to equitable distribution pursuant to New York's Domestic Relations Law (DRL).   If the retirement plan is an ERISA qualified plan, such as a 401(k), 403(b) or other employer-sponsored plan, the law requires the non-participating spouse to be the primary beneficiary, unless otherwise waived in writing. It is important to obtain an accurate determination of the value of pension plans, IRAs and stock holdings, together with their concomitant tax ramifications. Taxes on retirement funds must be considered when determining the true value of those accounts.
Except as otherwise provided in DRL § 236, a husband and wife cannot contract to alter or dissolve the marriage or to relieve either of his or her liability to support the other in such a manner that he or she will become incapable of self-support and, therefore, likely to become a public charge.

So what's the lesson here?  As the article brings up several times, when couples are getting married later in life, an prenuptial agreement is more important than ever.  Couples should not feel that there is some stigma associated with signing a prenuptial agreement, especially when doing so can remove so many complications down the road.

Additionally, getting a divorce later in life, even when uncontested, still have many more assets and liabilities to work out than a divorce among a younger couple.  It is very important for both spouses to take a close look at their financial picture so that issues of distribution can be dealt with in the easiest way possible.

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