Three tips for navigating the upheaval of a grey divorce
Divorce among the over-50s, or 'grey divorce', is on the rise in Australia. Today over a quarter (27%) of divorce petitions are for those who have been married for 20 years or longer.
The age of divorcees is also continuing to increase, with ABS statistics showing the median age at divorce is now 43.1 for women and 45.9 for men, compared to 38.2 and 40.9 in 1999.
There are many reasons older people choose to divorce. Some couples experience marital issues for some time but opt to stay together for the sake of the children and separate once the kids have left home. In other cases, there may be a catalyst, such as retiring and finding there are very different goals for the future, or one party meeting a new partner.
We have also seen society's view of divorce change over time. Where once there was a social stigma around divorce, today it is more accepted, with around one in three marriages ending in divorce and remarriage also becoming more commonplace.
Grey divorces bring their own unique set of challenges and can wreak havoc on well thought out plans. If you are facing a divorce in later life, here we look at some of the areas you need to consider including:
- Jointly held assets - property, superannuation, businesses, investments.
- Wills and estates including executors, beneficiaries, Powers of Attorney and guardianship appointments.
A fair share of assets
Dividing up assets during a divorce can be problematic, particularly if you are in a marriage where one partner has worked and the other has stayed at home. The cost of funding two residences and paying two lots of bills can be high, especially if you are close to or in retirement and lack the time to accumulate more savings and superannuation to help you recover financially.
To get around these issues, we sometimes see older couples opting to stay together in a marriage on paper only, for example by taking separate bedrooms in the family home or partitioning the home so each has their own space.
Other couples will divorce but may continue to hold assets together such as self-managed superannuation funds, a business or a family home. This is not generally advisable for the obvious reason that once you are divorced, it is not a great idea to continue to be financially bound together. However, if separating certain assets is problematic at the time of divorce, the key is to have very clear agreements in place with regards to ownership structures and decision-making processes to protect against later disputes.
Many couples seek the help of a third party, such as professional mediator, to help them to save on legal fees by mutually agreeing on the division of assets. This can make a significant difference in terms of cost. A straightforward divorce will typically cost a few thousand dollars, while an acrimonious divorce could set you back hundreds of thousands, particularly if there are significant assets to divide.
If an amicable agreement cannot be reached, it is important to seek advice from a reputable legal professional. Unfortunately, research shows that divorce after a long-term marriage can take a particularly serious financial toll on older women. We see cases where women have agreed to keep the family home while the husband takes most or all of the accumulated superannuation. This often results in women being left with minimal funds to live on
Lawyers specialising in family law will be able to provide advice on the best way to divide assets and ensure that each party is properly represented.
Protect your legacy
The separation and divorce process is complicated at any age but if you are over 50, it can be especially difficult. If your spouse is designated as your beneficiary on numerous documents, each of these documents will need to be reviewed and most likely updated. This includes wills, life insurance policies, trusts and superannuation accounts.
Jointly owned assets will generally pass to the surviving joint owner. If you do not want this to happen, you will need to take steps to sever the joint ownership over assets such as property, bank accounts and investments.
If you are permanently separated from your spouse, and particularly if they are listed as your Executor and beneficiary, you should update your will. Many couples separate for a time before they officially divorce but do not realise that their separation does not affect a will. In fact, in some states even divorce does not revoke a will in its entirety.
Powers of attorney and guardianship appointments also need to be reviewed and updated, particularly if your spouse has been appointed as attorney and guardian under these documents.
Updating an estate plan can be more complicated if one party has remarried or plans to do so. If you are in a blended family, it is important to give thought as to how to provide for your spouse as well as other beneficiaries upon your passing, for example by setting up a mutual wills agreement or capital protected trusts.
A capital protected or life interest trust is an estate planning strategy that can be used in a number of situations, the most common of which is where couples are in their second or third marriages and have children from other marriages.
If you have remarried and wish to ensure that children eventually receive some or all of your accumulated wealth, a life interest trust could be a solution. It allows your spouse to be provided for during their lifetime, after which time your assets are passed to your nominated beneficiaries.
Given the complexities of estate planning, it's important to note that there is no one-size-fits-all solution to the issues faced by those who are divorced or in a blended family.
Don't go it alone
There are few things more devastating than divorce but splitting over the age of 50 can bring added stresses.
The good news is, today there are plenty of resources available - many of them free - to help you navigate the changes and make the split as smooth as possible.
If your circumstances are complex, you may also wish to engage help from a professional financial adviser and lawyer, who can advise on preserving wealth and accessing any government benefits you are entitled to, so you can look forward to a brighter future.