The gray divorce revolution is in full swing. Among U.S. adults ages 50 and older, the divorce rate has roughly doubled since the 1990s. While the overall divorce rate is on the decline, the gray divorce rate continues to rise.
The financial planning process for a gray divorce can be a uniquely daunting task, particularly if you and your spouse have been financially intertwined for many years. There may be many files to locate, questions to ask, accounts to review, and calls to make. With the help of an experienced attorney, you can ensure that all of your finances are in order before you begin the divorce process.
Below are some financial factors to consider as you prepare for divorce after many years of marriage.
The financial fallout from a gray divorce can include decreased earning power for both parties. This is especially true for individuals who have been out of the workforce for an extended period of time, as they may struggle to find employment or re-enter the workforce at a level that corresponds to their previous income level.
However, it’s worth noting that the impact your divorce has on your income will depend on a variety of factors, including the specifics of the divorce settlement, the financial assets and liabilities of each party, and each spouse’s respective earning potential going forward.
Pensions and Retirement Accounts
If you have a 401(k) or other employer-sponsored retirement account, these accounts are considered marital assets and therefore may be subject to division during your divorce. The specifics of the account division can vary depending on the terms of the divorce agreement, such as whether the split will be 50/50 or if one party will receive a specific percentage of the account. It is critical that you work with a skilled divorce attorney to ensure that your assets are protected and the division is equitable.
Social Security benefits are not considered to be marital assets under Michigan law. However, individuals may be able to receive Social Security benefits based on an ex-spouse’s record under the following conditions:
- Spouses were married for at least 10 years
- Ex-spouse seeking benefits is not currently married
- Ex-spouse seeking benefits is at least 62 years old
- Ex-spouse seeking benefits would otherwise receive a lower payment based on their record
It is important to note that if your spouse qualifies to collect Social Security benefits based on your record, the amount you receive will be unaffected.
Medicare and Health Insurance
If you are on your spouse’s health insurance, you may lose coverage with them after your divorce is finalized. To avoid a gap in coverage, it is recommended that you consider your health insurance options while the divorce is still pending.
If you are over 65, you may be eligible for Medicare, a government-sponsored health insurance program that provides coverage for seniors and people with disabilities. If you are currently covered by your spouse’s employer-sponsored health insurance, you can sign up forMedicare Part A (hospital insurance) and/or Part B (medical insurance) within eight months of your divorce. You will need to pay premiums for Part B coverage
If you are under 65, you may be eligible for COBRA, which allows you to continue your health insurance through your former spouse’s employer. You may also be eligible for the Affordable Care Act (ACA), which offers subsidies to make insurance more affordable. Check the Health Insurance Marketplace to find out if you are eligible for and apply for ACA coverage.
After your divorce, you may want to update your estate planning documents to reflect your new status as a single person. This includes updating your will, power of attorney, and health care directive. You’ll also need to ensure that your beneficiary designations are up-to-date on all of your accounts, including your retirement accounts and life insurance policy.
An Experienced Michigan Divorce Attorney Can Help You Sort Out Your Finances
If you are divorcing after decades of marriage, it is important to remember that you do not need to tackle any part of the process alone. Seek the assistance of an attorney with experience representing clients divorcing in their golden years. Your attorney will help you navigate the unique financial challenges that arise during gray divorce.