Finances in Marriage, Part II: Senior Divorces- Worries and Considerations

There are many reasons given for the upswing in divorce evident in the senior population. Some say it is because we are living longer. Others say that we have less tolerance for remaining in unsatisfactory relations or because the children are grown up and independent and now it is our turn to venture out and find a new life. The actual reasons behind the increase in divorce among couples 60 and older are not the purpose of this article. In a sense, it is “what it is.” Our goal is to zero in on some of the distinct issues present in later-life divorces. Naturally, not all divorcing seniors face the same problems or have the same concerns. Consider, instead, this article as a sample of the issues that we have witnessed in mediating senior divorces at the Centre for Mediation and Dispute Resolution.

MONEY AND SUPPORT

In Massachusetts, the alimony statute has an expiration date depending upon two factors: length of the marriage and age of the paying spouse. If you are married less than 20 years, the timeline for alimony is based on a percentage of the years of your marriage. If you are married over 20 years, alimony terminates when the payor spouse reaches full social security retirement age of 67. Considering the 67 age limit, if a couple is divorcing when the higher income spouse is 62, regardless of how long the marriage, the alimony has a 5-year limit. All this, of course, can be subject to negotiation. A couple can agree that alimony will extend beyond the 67 age limit to, perhaps, the payor spouse’s retirement. Agreement is the key ingredient here; couples need to collaborate in considering each one’s needs now and in retirement and in structuring an agreement based on a reasoned and reasonable plan for the future.

The key takeaway here is that the older you are the fewer years in which spousal support will be paid, making it all the more important for divorcing couples to consider all sources of income and budgetary needs over time. Envision, if you will, a spreadsheet that examines your different budgetary needs over time (e.g., when your mortgage is paid in full, when your health insurance costs change, when you need a newer car). The same spreadsheet should include changes in income (e.g., when you will collect social security and/or pensions, required minimum distributions of retirement holdings, maturity dates for certificates of deposits, bonds, annuities).

The very critical question of “Will I outlive my income” is real. Sources of income that you cannot outlive (e.g., social security, pensions) and those that you can exhaust require analysis and coordinated planning for today and for tomorrow.

DIVISION OF ASSETS

Assets come in different varieties, each with a different set of complexities requiring understanding and consideration

• A house has a monetary value but it also serves as a place where you live. Individuals who say that “my home costs me less than a comparable or even less comparable alternative” need to also consider the use of the sale proceeds for investment, thereby providing another source of income. Indeed, homes are perhaps the most emotionally laden of the asset pool. Selling or keeping a home is rarely a straightforward decision. Yet to keep or not to keep, may not be the only part of the question. A couple may agree to continue ownership of a house, even jointly, for a period of time or to retain different percentages of the future sale proceeds. Alternatively, one party may keep the house, trading an equity interest for another asset (e.g., retirement funds).
• Retirement funds need to be considered with respect to tax implications (unless Roth IRA(s). One hundred thousand in retirement funds is not the same as one hundred thousand in cash, especially for senior couples. The monetary advantage of retirement funds growing tax-deferred is offset as one ages.  Required Minimum distributions limit the value of tax-deferred growth as well as how long you will live.
• Cash is the most straightforward of assets. Yet it also needs to be recognized that if one spouse is employed, the unemployed spouse may have a greater need for cash.
• Business interests pose a complex set of questions that need to be analyzed based on value of the business and future plans for divestment or retention or buyout of one spouse’s interest

HEALTHCARE PROVISIONS

Couples need to consider the alternative options available to them with respect to health insurance. If one spouse is carrying the health insurance through employment, the other spouse can continue to be covered post-divorce if the spouse’s employer is not self-insured. However, even if post-divorce coverage is available, companies differ in their provision of insurance for workers who qualify for Medicare, currently at age 65. Some employers require their employees to secure Medicare and will fund supplementary coverage. As such here, like alimony, post-divorce coverage may have an expiration date. If the spouse carrying the insurance is older than the other spouse, post-divorce coverage may end before the non-employed spouse is eligible for Medicare.

The takeaway here is similar to that of all the areas to be considered— future eligibility and timing of required change need to be part of the larger “spreadsheet” picture, that considers “Will I be okay?”

Not to be overlooked are uninsured and uncovered health needs, known and unknown, which may vary and increase over time.

LIFE INSURANCE AND WILL PROVISIONS

Support obligations, if possible, need to be protected from early termination in the event of the death of the paying spouse and, also, if one spouse is providing health insurance.

Beneficiary clauses for divided assets may be considered as well as those for assets that remain joint. A total plan, based on as many variables as you can identify, is the secret ingredient to an agreement that is both thorough and thoughtful.

Mediation offers senior couples a vehicle for engaging in productive problem-solving. A skilled and knowledgeable mediator needs to facilitate the identification of areas to be explored and the different implications and ramifications of your decision-making. A divorce at 60 is different than a divorce at 45. The options are not the same, nor are the needs. The mediator needs to help the couple to navigate the differences as well as the similarities.