When getting divorced after the age of 50, extra caution is needed during a property division settlement
When getting divorced, couples can be forced to figure out how to split their marital estate. Assets can be moderate or extensive, as in a high-asset divorce. Either way, proper care is important when making the decision about who should get what and how any transfers should take place. A wrong step can cost couples a large portion of their assets or savings. These concerns weigh heavily on the minds of persons over 50 who have less time left to work and make up any losses.
A Common Scenario
A husband and wife make the difficult choice to end their marriage. When identifying which spouse will keep or get which assets, the wife pushes hard to keep the family home. NextAvenue.org points out that this is often because women are focused on maintaining stability and a home can often represent that.
While this is understandable and common, it may not be in the wife’s best interest. According to the Huffington Post, the costs over time of taking care of a home can ultimately be more than the value of the asset at the outset. There can also be challenges for one spouse to refinance a mortgage into a single name, especially if that spouse must rely on the other for a portion of a future income.
What About Retirement Accounts?
In addition to a home, retirement accounts such as 401(k)s or pension funds are frequently the most valuable assets a couple may have together. Again, caution is urged before jumping to obtain a portion of these assets. Future taxation on distributions should be factored in as a large number of such accounts are funded with not-yet-taxed money. That means that for every distribution ultimately taken, the recipient spouse will need to pay taxes.
If splitting a retirement account does make sense in the end, the right processes should be followed. That entails the use of a qualified domestic relations order. A QDRO makes clear to courts, tax entities and any other agencies involved that the distribution of money is part of a divorce settlement versus a true early withdrawal. By doing this, additional taxes and penalties are avoided.
Gray Divorce Is Never Easy
As many as one in four American marriages involving spouses over 50 end in divorce. This is per data from the National Center for Family and Marriage at Bowling Green State University. When a gray divorce is imminent, contact Breeding Carter Crippen for help.