Perhaps it’s the empty nest, or perhaps you and your spouse have simply grown apart. Whatever the reason, divorce rates for couples over the age of 50 has been on an upward trend for decades. For many of these couples, the issues surrounding the dissolution can be very different from a younger couple with children under 18. Consider these three issues to avoid making costly mistakes.
Taxes on Retirement Accounts
For individuals over 50, pre-tax retirement accounts can represent a significant asset. It is crucial to both sides to understand that the actual value will be less than the current balance. Because the funds are taxed upon withdrawal, the true value of the retirement account may be much less than the statement balance. This miscalculation can cause serious issues. You may opt for the retirement accounts rather than the house only to discover later the imbalance.
Alimony Versus Social Security
In some divorces, monthly income may be more critical than dividing assets. However, alimony may be seen at a higher value than it may be due to the advancing ages of the individuals. Taking out a life insurance plan on your ex-spouse may be warranted to cover the risks. In addition, Social Security payments should be included in the negotiations. For couples married for at least 10 years, an ex-spouse can draw upon the other’s benefits as long as he or she remains unmarried. If your ex-spouse has higher earnings, this may become an issue at retirement.
Most likely, your children have left the home. However, you may still face some sticky issues. As a part of the divorce negotiations, planning to pass assets to the children rather than the future spouse of your soon-to-be ex will help ensure smoother transitions. A lifetime asset protection trust may be appropriate. If you have children under 18, then naming a guardian is equally important as well as providing for the care financially down the road.
Divorcing after 50 presents unique challenges during a typically emotional time. Obtaining competent, compassionate advice will help you maintain objectivity while ensuring that your rights are protected.