Divorce is difficult, whether you’ve been married for 5 years or
25, but it’s especially hard on couples who have been married for
decades, who spent years putting money into savings, tailoring estate
plans and planning for a comfortable retirement.
For the Baby Boomer generation, going into what’s been coined a “grey
divorce” can be overwhelming. Assets, automobiles, collectibles,
real estate, family heirlooms, and retirement accounts have been accumulated,
and they can all be hard to divide.
The existence of adult children and grandchildren can require a complete
revision of the estate planning documents. If you’re over 50 and
getting a divorce, or if you hope to remarry one day, it’s important
that your marital assets are divided in a fair and equitable fashion so
you don’t end up in an undesirable financial situation down the road.
Soon after the divorce is finalized, you’ll need to update your estate
planning documents so you can be sure that your wishes will be honored
when you do pass away. If you enter a second marriage, updating your estate
plan is more important than ever.
Marital Property vs. Separate Property
When two people get married, their assets will fall into two categories:
separate assets and marital assets, also known as “community property”
in community property states, such as California and Nevada.
What is considered joint and what is considered separate?
Separate property includes all assets acquired before the marriage, assets acquired after
the separation, and assets acquired by one spouse by gift or inheritance.
Marital property typically includes all property acquired during the marriage, regardless
of who earned the money, or whose name is on title. Marital property includes
IRAs, 401(k)s, cash in bank accounts, real estate, the marital residence,
automobiles, interest in a business, and more.
However, if a separating or divorced couple have a sound prenuptial or
postnuptial agreement in place, the nature of their assets may deviate
from the state’s standard interpretation of what’s joint and
what’s not.
Considerations for the Divorced Spouse
If you are getting divorced or are recently divorced, you have a lot to
consider. For example, you’ll need to update your beneficiary designations
right away, and you’ll want to consider a trust if you’re
getting remarried.
Often, prenuptial or postnuptial agreements are critical when establishing
a trust since they can clearly divide what would ordinarily be “marital
property” into separate property. Trusts can be valuable tools when
you have children from your first marriage.
Divorce can be challenging for the Baby Boomer due to their deep financial
ties with their spouse, but with property insight and planning, it doesn’t
have to derail your retirement, or your estate plans.
Contact an estate planning attorney for professional legal advice on the matter!