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Unique considerations for gray divorce

Maybe you just retired and realized you are two different people. Maybe you were hanging on, trying to make it work for the sake of the children. Whatever the reason for a decision to get a divorce when in your fifties or beyond, know that you are not alone. Divorce after the age of fifty, referred to as a gray divorce, is becoming more common. Recent research from the Pew Research Center shows the divorce rate within this segment of the population has doubled since the 1990s.

A later life divorce can come with unique considerations. After all, you have experienced much more in life and likely accumulated more wealth compared to your twenty and thirty something counterparts. Because of this deeper and likely broader foundation, it is important to look at divorce differently than those who are going through the process with less life experience. Some of the unique considerations that can impact your situation include the following.

#1: More assets.

Once we reach our fifties and beyond, we simply have more. We saved our earnings, diversified our portfolios, and maybe even bought that vacation home or cabin. Splitting marital assets is never easy but having a large pot to sort through can make it even more challenging.

#2: Business interests.

There is also the possibility that you or your soon to be ex-spouse either own or have significant interests in a business. It is important to get an accurate valuation for these business interests. If one spouse is interested in keeping full ownership of these interests, they may need to negotiate another asset of a similar value in exchange. This could be that second property or additional retirement assets.

#3: Retirement savings.

Divorcing after the age of the 50 means there is less time to build these assets. As a result, it is of utmost importance to carefully consider the division of these assets so both parties to the divorce have some funds for retirement.

Pension plans, 401(k)s, IRAs, the mix of retirement assets can be overwhelming and a misstep during the division process can result in a surprise tax bill. The Internal Revenue Service (IRS) generally requires a qualified domestic relations order (QDRO) to split a 401(k) plan and pension. Without this court order, the IRS will likely expect the person who is getting a portion of this asset to pay taxes on the transfer. The IRS also has rules about splitting IRAs. A failure to follow these rules can mean the person taking the IRA distribution ends up paying an additional tax bill. Employer pensions can also be difficult, as each employer can have different rules that guide how to split the account.

Navigating the intricacies of retirement assets during a gray divorce may be one of the more complicated portions of the process, but you do not have to go through it alone. You can hire professionals to help get a better idea of the value of the assets and legal counsel to better ensure the split is done correctly, reducing the risk of a surprise tax bill when you go to actually use those well earned retirement assets.

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