Thursday, July 1, 2010

Facing a "Later in Life" Divorce -- Part I

As Baby Boomers reach retirement age, they not only face changes in their work life. Increasingly, they are facing changes in their home life. Having a long-term marriage doesn't necessarily mean that divorce is out of the question. Facing a divorce in your 50's, 60's or 70's involves some serious concerns that may appear to be of a greater magnitude than the same issues experienced by 20-something, 30-something or even 40-somethings.

Typical issues for older Americans facing divorce include such familiar topics as housing, employment, retirement, health insurance, children and debt management, among other things.

  • Can you afford to keep the house? Should you? Should you sell it to cash out?
  • If you have a job, how long can you expect to keep it? If you don't have a job, are you employable at your age?
  • Will retirement funds that might have been sufficient for one household be enough to support two households?
  • Do you have health insurance available?
  • Do you have children in college? Do your adult children live at home or still need financial support? Can your children help support you?
  • How much debt is there? Can you afford to pay it off? Is bankruptcy on the horizon?
If you, or your spouse, file for a traditional litigated divorce in Tarrant County, Texas, what can you expect? While each judge is a little different, here, you would probably see something like this:

1. The initial consideration is whether you have a job. If you have a job, the question becomes how far you can stretch your income. Often one spouse has been the primary breadwinner and the other spouse has provided a supplementary income that was much lower. If you are the lower-income spouse, you will be in for a difficult time. Texas courts can't provide much alimony by court order, although you may get your spouse to agree to pay alimony at a higher level or for a longer period of time. Usually, you can't expect to just live off the alimony.

If you don't have a job, and aren't at retirement age, at the time of separation, you will probably face pressure to get a job right away, even if you have been out of the workforce for a number of years or if you lack training for a good job.

2. One of the spouses can probably keep the house if he or she wants it and can afford it. Of course, it may be hard to afford it without a job. There may also be pressure from the other spouse to sell the house and split the cash, even if you couldn't qualify for a new mortgage.

3. The other financial issues revolve around whether there is enough cash available. If you are lucky and there's plenty of income and other assets, you may be able to divide the property and debts and still live comfortably.

On the other hand, if cash is in short supply, it won't get any better when you divorce.

In a litigated divorce, the basic approach is to encourage an unemployed spouse to get a job and then divide the assets and debts, usually in the neighborhood of 50-50. If there's a great disparity in income between the parties, a court may give a little more of the assets to the lower-income party, but that doesn't always help, especially if the main asset to be divided is a retirement account.

There's normally no mechanism to get education or job training or job counseling for an unemployed party. Basically, you're told to take this pile of cash and take care of yourself (assuming there is a pile of cash -- often it's more likely to be a pile of debts). There's no attempt to do financial planning in most divorces and no significant thought goes into property division other than determining a percentage for each side.

In many cases, going through a later in life divorce can be very traumatic and can end up with one or both parties in a worse situation financially and, sometimes, personally.

So, what can someone do?

One way to mitigate the effects and the experience of divorce for more mature people is to consider using Collaborative Law. In the next post, I will contrast how Collaborative Law can help manage the later in life divorce.