Does heartbreak have an age limit? The divorce rate among couples over 50 has doubled in the last 25 years, and tripled amongst couples over 65. Loss of a spouse is a tragedy; the end of a marriage is equally traumatic; it is the end of a lifestyle, an identity and perceived financial security.
The financial implications of Later Life Divorces are enormous.
- Couples are approaching retirement and may have limited earning years remaining
- While assets get split, each will need to consider a plan that would support them for 25-30 years.
- Division of Pensions, Retirement Savings and investments is crucial.
- Spousal support is often on the table
- Health care expenses and insurance needs to be considered. Women typically outlive men by 4- 5 years; not only must they support themselves, but they must also consider planning for additional health care expenses.
Second or Third Divorces:
In north America approximately 50% of first marriages; 67% of second and 73% of third marriages end in divorce. It is likely that in second and third marriages, one or both parties have brought assets into the marriage. There may be children from previous marriages, support payments, businesses and other assets to consider.
Another important consideration is the mismatch of knowledge. Often in a marriage one party is responsible for, and is better equipped in managing the finances. This leaves the other party vulnerable and at a disadvantage at both getting a fair settlement and managing the proceeds from the settlement.
Understanding your limitations so you can educate yourself and get the right help and advice is important. As a Chartered Divorce Financial Specialist (elixirconsulti.wpengine.com) I can help clarify your options.
Spousal Support vs Lumpsum Payment.
Depending on the situation, when deciding between monthly spousal support or a lumpsum payment, consideration should be given to:
- Taxes – spousal support is taxable in the hands of the recipient and is a tax deduction for the supporting spouse, while there are no tax implications for a lumpsum payment.
- Stability in Income- If the supporting spouse loses their income, it is unlikely they will be able to continue paying.
- When receiving a lumpsum payment, the investment knowledge and ability to manage finances of the receiving spouse should be considered. Risk of not investing, or on the other extreme, investing in high risk securities inappropriate for their risk profile could both be detrimental.
- Addictions like alcohol or gambling.
Division of Assets:
Division of assets can be complex. The basic principal is taking stock of all the assets accumulated during the marriage; subtracting all the liabilities or debts to arrive at a net worth, which will then be divided between the two parties. However, some assets may be difficult to value, such as pensions and businesses.
In addition to valuing assets, some practical issues need to be considered. For example:
- Does your pension administrator allow for the pension to be split?
- If one party elects to keep the family home, will they qualify for the mortgage?
- As a part of the settlement, one party gets the Locked in RRSP account only to realize that are unable to withdraw from it till they reach a certain age.
- The real estate portfolio or investment portfolio is down due to market conditions. If one party chooses to take a cash value of the current net worth, the long-term impact on their future cash flow and net worth may be significant.
Then, there is an underlying lack of trust. One party may not want to work with the Accountant or Financial Planner that has been working with the family for a while due to perceived impartiality.
Working with a Financial Divorce Specialist
I am a big believer in education. We learn new things every day depending on what we are dealing with. If someone has a child with special needs, they would learn everything about that condition so they can help their child. It may not have been a part of their formal education, but they are an expert. Of course, they wouldn’t replace the child specialist, but they would be equipped to ask the right questions and understand their Child’s needs.
Your Finances are no different. Its an integral part of you and your life. When dealing with a divorce, especially in the later years, much is at stake and you cannot afford to get it wrong. Professionals like myself can help you, but you are the only one in the unique position to know:
- What is important to you;
- Your comfort;
- Your vision for your future; and
- Your fears.
There are many ways a settlement can be reached, as a Chartered Divorce Financial Planner, I look for solutions that address your unique situation.
You may not have the ability to crunch numbers or figure out the tax implications of certain decisions, (that’s my job) but you can educate yourself enough to ask the right questions.
Your input is vital, and your clarity will reward you in many ways. It will reveal options you hadn’t considered so that you may negotiate powerfully for things that really matter to you.