Fifty Shades of…Grey Divorce
Episode 53
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Disclaimer: The materials and content within this podcast are intended as general information only and are not to be considered a substitute for professional legal advice or a consultation with a lawyer.
1. Family Law Tip of the Week
Speed up your divorce settlement by disclosing all the evidence (and documentation) relevant to your case issues sooner, rather than later. Ask your ex to do the same. You cannot possibly make an informed decision about your case without all the facts in front of you!
2. Fifty Shades of…Grey Divorce
Nancy Hetrick is a Certified Divorce Financial Analyst (CDFA™), an Accredited Wealth Management Advisor (AWMA), an Accredited Asset Management Specialist (AAMS), a Chartered Mutual Fund Counselor (CMFC), and a trained mediator. In today’s episode of The Family Law Insider, Nancy talks to us about divorce of people in their golden years.
What is a “Grey Divorce?”
It’s a new term coined by the media. A study shows how the divorce rate (for people ages 50 and older) has doubled between 1990 and 2010. Suddenly, everybody’s talking and writing about “Grey Divorce.”
Why Is This Happening?
The study doesn’t say so, but tons of people have come up with their own theories. Some researchers assume it is a trend largely because of extended life spans; people are living longer, and people are living better quality lives after age 50.
Nancy thinks one of the biggest factors is also the growing financial independence of women; women have choices they didn’t have before. They have their own careers, and they have their own 401(k) plans, so they feel more financially able to make major changes over age 50.
Awareness
In the past, many women lived their lives as homemakers without the knowledge of what they might be entitled to should they go through a divorce. Many of them didn’t know they were entitled to half of their husband’s pension.
No-fault divorce has only been around since the late 70’s or early 80’s. This is a whole new era of personal freedom, especially for women. But if these women never managed their finances on their own, it can be overwhelming. Nancy has had clients who have never written a check for 30 years and don’t even know how much things cost.
Nancy thinks as we get more women in the working world, more women being independently financially competent and financially literate, it will contribute to divorce encounters that didn’t happen 20 years ago.
Think Of Pension As A 401(k)
There’s some kind of emotional attachment to pensions. Nancy constantly reminds her clients to think of pensions as 401(k)s. Many people don’t see them that way; they see them as a paycheck that keeps coming. When Nancy explains how pension is just a 401(k) dressed up differently, it helps the clients shift their mindsets regarding pensions.
Nancy explains to her clients how both pensions and 401(k)s could be used for income when they retire. With a pension, you know exactly what income it will provide. Nancy then does all the calculations to figure out how much money they need invested to generate the stream of income that will provide for them at age 65.
Initial Vision
The issues that are especially unique in Grey Divorce is that people in their 50’s don’t have time to recover. People start with assets they have and plan a certain retirement together. Those same assets have to support 2 retirements after a divorce. Unfortunately, both parties still have the vision of retirement they originally created together in their mind. Nancy helps them understand that they have to let go of that.
The most challenging situation is a couple in their early to mid-50’s in which one party has been a homemaker. These days, most laws are not favorable for long-term spousal maintenance. It is intimidating and frightening to people in that position. This is where Nancy helps people come up with a financial plan to live up as close as possible to the lifestyle they envisioned.
Understanding After Benefits
Another issue for Grey Divorces is understanding existing medical benefits. Many people who have worked for large corporations or the government have additional medical benefits provided during retirement—and those are considered marital assets. Some plans let people assign benefits to an ex-spouse. Some health care benefit packages are marital assets that get valued and can be offset against other assets.
Statements
Most people in long-term marriages have their wills and trusts in place. A big issue for a Grey Divorce is unwinding and restructuring all of that. Many of these couples often still want things in place for their children. Nancy helps make sure that these couples agree to a statement plan, which helps change the nature of the trust.
Getting Credit In Your Own Name
If a woman has been a homemaker for quite some time and she’s only going to have assets to support her (as opposed to income), it will be very tough for her to qualify for credit. This is something people have to be aware of up front. Occasionally, Nancy recommends these women put credit cards in their name while they’re still married.
Family Business
Couples in their 50’s or 60’s are more likely to be business owners together. Splitting a family-owned business can be incredibly challenging and difficult. Both parties still want a role in that business without the other.
Nancy often writes on helping younger people protect themselves from someday facing these divorce issues. Here are a few things that she encourages them to do:
Be aware of the finances during marriage
Usually, one or the other spouse is handling the finances. Once a month, sit down and go all over your accounts. Make sure that you’re on track and you both understand where you’re at financially. Know what kind of retirement plan the other has. In the event that something happens, you’ve got the information, you can start doing some projections and you can feel a little bit more in-control.
The “ignorant” spouse (a homemaker who really didn’t have as much education and didn’t know any better) is not an issue anymore. That’s not what we’re talking about here. We’re talking about laziness where one person handles the finances and the other doesn’t care. Everybody’s got to be on top of their financial game.
Know Your Plan
If there are any retirement plans that require division (other than a 401(k)), pensions, or government retirement plans, get a plan document before going to negotiations with your spouse. You’ll understand what your options are. Some plans will let you do certain distributions, some plans will let you assign certain benefits to the ex-spouse, and others won’t.
As Nancy says,
“Folks, it’s real money. You need to be aware of it.”
For some reason, we don’t think of retirement plans as real money while we’re working.
“My advice would be also to get that QDRO done before the decree of dissolution is signed. There’s a huge amount of risk if you don’t.” – Wendy
Give Some Allowance
One other thing that’s really common in Grey Divorce is the retirement date that you thought you’re going to have ends up being a few years later. Unfortunately, that’s just the fallout. To make up for this requires a change in lifestyle. That’s a difficult thing that has to happen.
De-cluttering And Downsizing
You’ve lived in the same house your whole lives, you’ve got the kids and all their stuff, you’ve got garages and sheds, and all this lifetime of accumulation. It can be really challenging to sort through these things at 50 to 60. It is also freeing to declutter.
Nancy Hetrick is one of “the best kept secrets” Wendy’s used in her own cases. If you’d like to know more about her and a free book, check her out here.
3. Thoughts From the Life Coach
In today’s thoughts, James talks about liars.