As discussed in Part 1, divorcing after the age of 50 will be different than a divorce at a younger age. You may have expected to retire comfortably, but a divorce may result in more household costs and less available income. Those divorcing at a later age may have to resume working or stay on the job until they are older. Thus, financial planning becomes even more important for those divorcing when they are 50 or older. Part 2 will cover several aspects of divorce financial planning.
Budget Cost of Living
Drafting a comprehensive post-divorce budget with the help of a divorce financial planner will accurately calculate expenses and the income required after a divorce.
Having a diversified portfolio is even more crucial after a divorce. Being reliant on a lone asset is unwise. A retirement plan and house often represents the entire marital estate, so plan to diversify your investments after the division of assets.
Post divorce, the beneficiaries in wills or retirement plans may need to be revised. Review your existing powers of attorney to ensure they still meet your desires. Discuss death benefits resulting from a retirement plan, trust, life insurance or will. Trusts may also be established from a divorce settlement to provide financial support or education to children and grandchildren.
The serious health issues of a spouse, especially one who does not generate income or have sufficient assets, may affect the division of assets and alimony. A spouse afflicted with a cognitive impairment, such as Alzheimer’s, may require a guardian appointed by the court.
It is crucial for someone who is divorcing at a later age to have a plan for earning income, whether through employment or passive income from dividends, rentals, and investments.
Post Marital Agreement
The resolution of financial issues by a post marital and separation agreement instead of a legal divorce may be more advantageous to those divorcing after 50 in certain situations. Postponing the divorce until a spouse has Medicare eligibility is an example.
For divorces after 50, the reduction of an asset’s value in property division to mitigate tax consequences makes sense. In addition, forms of delayed payment like alimony should be considered in light of present and future value and inflation.
Professional Guidance for Divorcing Individuals
John Faggio, CPA, CFP®, CDFA™, is a Financial Divorce Specialist. Faggio Financial helps divorcing individuals reach an equitable financial settlement in a professional, cost-effective, and expedient manner. Call (410) 884-4098 for professional guidance today.