A divorce can have a significant impact on retirement plans. This problem is growing because the rate of divorce for spouses over 50-years-old doubled over the last 20 years, and older divorce even grew for remarried couples.
One of the biggest financial challenges for divorcing couples at any age is the added costs of maintaining a standard of living. Couples split their property and assets that they acquired over their time together, but must keep two separate households.
There are several ways to address these challenges. First, couples can engage in collaborative divorce, in which they meet with their attorneys and settle property division and support issues. This allows them to agree on outstanding issues instead of a court imposing a decree on the couple.
Changes to the federal tax law provides other opportunities to renegotiate a more favorable settlement. Spousal support payments will not be deductible and will not be taxed as income beginning with settlements reached in 2019. There may be some situations in which the spouse pays less in support, but the recipient will receive a financial benefit because payments are not taxed.
A spouse may also be eligible for Social Security benefits based on their former spouse's work history if the former spouse earned more. The spouse seeking these benefits must be single, both spouses must be at least 62 and the marriage had to last at least 10 years.
This larger benefit is also an important reason for couples considering divorce to wait at least 10 years. In years eight or nine of a troubled marriage, couples may want to delay the process to reach the 10-year milestone. A divorce concluded even one day before the 10 years disqualifies the spouses from these Social Security benefits.
An experienced family law attorney can help spouses over 50-years-old seek a settlement that addresses these financial issues and other legal matters, such as property division and spousal support. They can advise spouses of their rights under Louisiana law and the impact of the recent changes to the federal tax laws.
Source: Chicago Tribune, "Gray divorce can have big financial impact," Eileen Ambrose, Kiplinger Personal Finance, March 2, 2018