Yahoo Finance Gray Divorce: What Women Who Divorce Later in Life Need to Know
Although divorce rates overall for Americans are falling, the number of people older than 50 who are splitting up is on the rise.
Divorces are traumatic at any age, but these "gray divorces" can take a significant financial toll, especially on women. Married women may have been out of the workforce, and even if they do work, women earn less than men. Additionally, women usually live longer than men, which means they need to have enough money to support themselves later in life.
Aviva Pinto, certified divorce financial analyst at Bronfman E.L. Rothschild in New York, says because of divorce's emotional trauma, many women want it done quickly without thinking about the long-term ramifications.
"That is financial suicide," Pinto says. "You can't let emotions rule in this place. You have to have a saner head counsel you, or you have to come to grips where divorce is really about the money."
Get all the records. Patty M. Estopinal, certified divorce financial analyst at Baird in Roseville, California, says while both parties are supposed to bring all their documents to the proceedings, it's common for one person to try to hide assets. Gather at least three years of tax returns, as those records may show different tax schedules that might not otherwise be disclosed, she says.
[See: 11 Great Investing Tips for Women.]
For higher net-worth couples, consider hiring a forensic accountant to ensure all assets are discovered, Pinto says.
"They may find you're entitled to a lot more than what he's put down on paper. Then you're in a better bargaining position," Pinto says.
Make a copy of all financial statements, the hard drive on the family computer and use a smartphone video recording app to document all the objects in the home, she adds. Pinto says she's handled cases where high-value objects bought with marital assets were removed from the home in an effort to hide them.
"If things start disappearing you can at least show this art print was on the wall, but now is no longer there," she says.
Melody Juge, founder of Life Income Management, with offices in southern California and western North Carolina, and who runs Juge Girls, a financial education website for women, says women need to know their spouse's work history to make sure there's not a stray 401(k) account sitting at a former employer.
Think of the future. Women need to carefully consider how they receive assets, Estopinal says. Many women often want to keep the family home, but sometimes that's not the best financial decision.
"Keeping the house involves the property tax, and a house doesn't grow the same way a 401(k) account would grow. Plus there's upkeep of a house," she says.
Receiving illiquid assets like houses or businesses can mean reduced cash flow, which can be problematic, especially since in divorces income is halved, while expenses double, the experts say.
There are tax implications when dividing assets, too. If assets are divided at the time of settlement there are no taxes, and child support is also not taxable. However, alimony, also called spousal support, is considered taxable income.
For married women who have only worked sporadically or not at all, they should consider spousal support. It can help cushion the transition between returning to school to update skills and joining the workforce, the experts say.
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"The biggest challenge for women who get divorced later in life, and if they don't have a career established, is they're getting closer to retirement. They have less number of years to save for that retirement nest egg that they're going to need throughout their life," Estopinal says.
Juge recommends for women who will receive spousal support also take out a life insurance policy on their soon-to-be ex-spouse while divorce proceedings are ongoing to protect that income stream.
"What if he loses his job or becomes disabled? What if he dies? Say he owes her alimony and three years later he dies. She should have a life insurance policy on him that she owns and she pays the premium for. That way he has no ownership rights; he's just the insured. She's the applicant and the owner," Juge says. "He'll have to take a medical exam for it. That's all he'll have to do."
In addition, it's not enough for women to assume they'll remain the beneficiary of accounts just because the spouse agreed to do so through attorney communications, Juge says.
"That is no good. The ownership of the contract has to be changed to her name," she says. "[Otherwise] he can turn around and make [someone else] the beneficiary. The owner of the contract is the person who controls it. The divorcing spouse has to be in control of it."
Tax considerations. Pinto says couples who will split taxable brokerage accounts must consider the capital gains on those assets, and ensure both parties will have the same amount of capital gains on appreciated assets. That's important for women to know in case they need to sell shares for cash-flow purposes.
"Say you bought Apple (AAPL) at $10 a share and now it's $110 or whatever. You have a $100 gain in there. If you go to sell it, you're going to be hit with capital gains taxes," Pinto says. "If you do need to sell those shares, know a dollar is not going to be a dollar if capital gains are in there."
Decide investments once it's final. Juge says she doesn't recommend any planning or investing until the divorce is finalized and everything is transferred correctly.
At that time the woman can take a step back and think about her future financial goals.
[Read: 6 Ways to Protect Your Pocketbook From Sky-High Medical Bills.]
"You can't make a decision in the same energy as viewing a problem," she says. "A solution is a creative energy and it is different than the energy that surrounds a problem."
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