Financial Safeguards Needed as Senior Divorces Soar

US News

Sad to report, but divorces among older Americans are surging. That's saying something in a country that is already the world leader in divorces. And with baby boomers--already no strangers to divorce--entering middle age at a fast clip, the divorce trend may well become even more pronounced.

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In their own recent research that included a review of earlier work, Susan L. Brown and I-Fen Lin at Bowling Green State University's National Center for Family & Marriage Research Center found that the divorce rate among Americans at least 50 years old had doubled between 1990 and 2009. The doubling trend held up among those over age 65 as well as among younger boomers, although the numbers of divorces is higher among the younger group.

People already divorced at least once and remarried are two-and-a-half times more likely to divorce again than first-time marrieds. Half of all divorces for people aged at least 50 involved remarriages, the researchers said, and they thus predicted the trend would accelerate.

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Their paper did not attempt to find causes for the increase. It cited earlier research that found several related underlying trends: more older people, the cumulative impact of more divorces, greater social acceptance of divorce, rising female equality and financial independence, and baby boomers' convictions that it was proper to pursue more satisfying lives even if it meant leaving a partner.

Regardless of the causes of the increase in later-life breakups, financial advisers interviewed by U.S. News say they are seeing the trend among their clients. Linda Stirling, a financial adviser with RBC Wealth Management in La Jolla, Calif., went through a divorce herself earlier in life. "Having been through it, it's always something that's been on my mind," she says.

Jeffrey Sullivan, an adviser in Westchester County, N.Y., and partner with HighTower Advisors, says, "I've certainly experienced [growing divorce rates] in my practice ... Somehow, with baby boomers reaching a certain age and the kids being out of the house, it has seemed to spike."

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Stirling says her advice to clients breaks down into three general areas: 1) Take steps to protect yourself financially; 2) Act with your head, not your heart; and 3) Be practical. Sullivan provided similar advice, including reviewing the types of asset distribution and other challenges faced by wealthier clients. Here's what they recommended:

Everything can change. Single life can be expensive. For most people, living expenses in their new household may be much higher than simply half the expenses of their marital household. You will need lots of new legal documents--wills, living directives, insurance policies, and the like. You also may need new sets of professional relationships--lawyer, accountant, insurance agent, and a host of less weighty but still important household vendors.

Get help. Make sure you have expert advice from someone who has your best interests in mind, has experience in divorce finance, and can be logical where you're emotional. "For someone in their 60s," Stirling notes, "generally speaking, there are some substantial assets there to be considered." Sullivan says using a mediation firm rather than two sets of attorneys can be much faster and cheaper, and may be a good strategy for relatively amicable divorces. Getting inside a courtroom should be the last resort. "You really don't want a stranger like a judge to be deciding who gets what," he says.

[Related: How Couples Sabotage Their Finances]

Obtain and copy all documents. "The parties need to thoroughly examine all financial statements, make copies, and get those copies outside the house" in a safe storage location, Stirling says. "Credit reports are extremely important," she notes. "Many spouses are not aware of the amount of debt that's being carried" by the household and which they may be jointly responsible for repaying. "Ignorance is not bliss in a marriage," Stirling says.

Joint accounts. "We counsel that upon separation, you should immediately shut down that joint account and open up two individual accounts," Sullivan says. "Fund them with the liquid assets of the distribution [from the divorce] with the assumption that each spouse will get some funds."

[See How Much Should You Save for a Comfortable Retirement?]

Ownership and title of assets. "How are things titled?" Stirling asks. "Get your name off" credit and debt obligations if possible. "Part of being practical is not holding onto impractical possessions." Divorce is hard enough without being encumbered by unneeded possessions. "People need to disconnect all those tendrils that will affect them for a lifetime unless they sever them at the time of the divorce," she says.

Liquid assets. Sullivan recommends a pro-rata split of assets that are easy to value. After tax considerations are weighed, splitting asset accounts avoids the problem of trying to project future market performance on differing asset distributions. Each spouse faces the same risks.

Illiquid assets. Setting values on real estate and especially on ownership stakes in private businesses can be much harder. "The sustainability of an asset [such as an ongoing business] is very difficult in this environment," Stirling says. Sullivan notes that some clients put illiquid assets into trusts that can, over time, generate payment streams as agreed to in the divorce.

[Related: The World's Most Expensive Divorce Settlements]

Future payments. If a spouse is entitled to a stream of future payments as part of the divorce, Stirling stresses the need to make sure there is life and disability insurance in force on the spouse responsible for making future payments. Social Security, pensions, annuities, and other delayed income streams also need to be evaluated in the same light.

Preventive steps. Thinking about ways to protect yourself in a divorce is not that unusual for people in long-running marriages and especially not for people who are getting remarried. If there are valuable assets that one spouse brings into the relationship, think carefully about maintaining clear title in that spouse's name so that distribution of that asset is not at issue in a divorce. In many marriages, Stirling notes, it's common for one spouse--usually the man--to take the lead in financial matters. However, not knowing about household financial details can put the other spouse at a serious disadvantage during a divorce. It can hurt even stable marriages as well, so it's important to make sure you are an equal financial partner in your marriage.



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