For older couples, future plans can take a nosedive when they decide to split. Even though the divorce rate in Indiana and elsewhere is down overall, it continues to go up for couples aged 50 and older, and it has tripled for those aged 65 and up since 1990. Among the reasons so many are divorcing as they enter their golden years are that:
- Baby boomers who remarry have less stable or committed second marriages.
- Women who are financially secure want financial independence from their spouse.
- When children leave the home, empty nest syndrome triggers a reassessment of a couple’s future together.
The consequences of splitting up late in life can include significant financial risk, so before heading down this road, it may be wise for residents of Evansville and surrounding communities to examine all the angles before filing divorce papers.
Financial resources to consider
Indiana is an equitable division state, meaning that the courts will decide on a fair division of property and assets that is not necessarily equal. Having said this, the longer the marriage has lasted, the more equal the division of commingling assets. Everything the couple has accumulated financially, as well as vehicles, property and the family home, may end up on the chopping block.
Deciding which assets to split in a gray divorce may involve liquidating assets such an annuity, an IRA, or a long-term care plan. It is important to examine all sources, including:
- Having a valuation of both marital and nonmarital assets, especially if there are business interests involved. This will include life insurance policies, retirement accounts, cash, investments and real estate holdings, offset by debt.
- Social security, which will be for a spouse who would draw off the benefits of the spouse who was the main wage earner.
- Health insurance, which can become a critical issue for those under 65 who must have medical coverage until Medicare kicks in and who were covered under their spouse’s policy. Learning about Cobra benefits and limits will be important, especially if they also have long-term care needs.
- Estate planning, especially when updating beneficiary and powers of attorney designations.
Don’t overlook the tax implications in the divorce
There will be tax considerations for both spouses from the divorce. When liquidating property, remember that the IRS views the appreciation from the sale of the family home differently than it would a capital gains appreciation. Also, if one spouse is paying alimony, the payor will not be allowed a tax deduction and the payee will owe income tax on the payments.