Special Financial Issues in Grey Divorces

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Special Financial Issues in Grey Divorces

The overall divorce rate is lower than it has been since the no-fault revolution of the 1970s and 1980s. But among couples over 60, the divorce rate is at an all-time high. As outlined below, these marriage dissolutions have some rather unique financial aspects.

The reasons are varied. Many of these couples have been married before, and the subsequent marriage divorce rate is much higher than the first marriage divorce rate. Additionally, divorce’s moral acceptability rating increases all the time. So, many people who never considered the D-word before now see divorce as a legitimate way to end what they see as a bad marriage.

Because of these special financial issues, a Chicago family law attorney must approach these cases in a special way. In most cases, many people have worked hard to get what they have, or they have looked forward to the “golden years” of retirement for a long time. An attorney must work hard to preserve these things.

Social Security Benefits

These rules vary significantly in individual cases. But in most situations, married people are entitled to higher Social Security benefits than single people. Therefore, a legal separation might be a better option than a divorce.

Illinois is one of the only states where legal separation is an option. The judge divides property, orders support payments, and makes all divorce-related orders, short of dissolving the marriage. In this regard, the spouses’ legal status remains unchanged.

Some people opt for legal separation instead of divorce for emotional reasons. Perhaps they are not ready to completely separate from their spouses, or they are among the significant number of people who feel that divorce is immoral or contrary to their religious scruples.

Home Equity

Many people over 60 still have minor children at home. Others have 20-something children who are legally adults but not yet fully independent. In these situations, retaining the family home is often essential.

Such retention could also be an economic necessity. If the market is depressed and the house must sell quickly, it might not fetch much of a price.

Most people in this age bracket have a substantial amount of home equity. To preserve the non-owner spouse’s financial rights, an owelty lien might be an option. The non-owner spouse receives a lien for his or her share of the equity at the time of divorce. Later, when the house is sold, that lien must be paid.

A setoff might be an alternative in other situations. For example, the owner spouse could waive a share of the other spouse’s retirement account in exchange for all the equity in the home.

Retirement Accounts

Frequently, an IRA, 401(k), or other retirement account is worth more than the equity in a home. Furthermore, these nest eggs have a significant emotional value. They represent the reward for a lifetime of saving and sacrifice, as well as future financial security.

Legally, retirement accounts are generally marital property which is subject to equitable division. That usually, but not always, means a 50-50 division. Special rules apply to military retirement accounts.

Non-owner spouses have several options. They can do nothing with their shares, and receive proportional payments when the owner spouse retires. They could also cash in the account and pay a tax penalty. Most people roll the money into a new retirement account.

Once again, a setoff might be an option. A setoff could enable an owner spouse to retain all or most of the account.

Contact a Thorough Attorney

Grey divorces have special legal issues. For a free consultation with an experienced family law attorney in Chicago, contact Andrea Heckman Law. Home, virtual, and after-hours visits are available. 

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