Why Your Divorce is Unique


As you approach your golden years, you realize you may be heading toward divorce. Now you start asking questions: how does one start the process, how much is it going to cost, and how long does it take?

Many Baby Boomers have misconceptions about divorce. These misconceptions arise from all sorts of people who mean well but mislead when sharing their own experiences and “knowledge from the battlefield”. Everyone has a story to tell. It seems that either they came through divorce reasonably well or they are financially devastated by divorce. The perils of not knowing what lie ahead seem enormous. Your anxiety is clearly growing as it becomes increasingly confusing to know what are the facts versus what is fiction, both legally and financially.

Divorce myths abound in this fertile environment but are particularly dangerous for those nearing retirement. The trend for gray divorces is strong, and with longer life spans, there is a need to educate Baby Boomers about how to avoid common financial mistakes in divorce that last a life time. It takes a powerful discipline to ferret out myths about divorce and rely on your team of divorce professionals.

Some of the most common myths include:

• “Everything is split 50/50.”
• “She can’t get any of my inheritance.”
• “If I move out, the Judge will say I’ve abandoned my house/my kids!”
• “It’s in my name, so it’s all mine.”
• “Our agreements about the kids are final.”
• “The credit cards are in her name, so all of the debt is hers.”
• “He had an affair, I should get more (alimony and assets)”
• “The Wife never pays alimony”
• “If I don’t get alimony now, I can always get it later”

Each state has its own divorce laws for how income and property will be shared. Support is defined, quantified, and qualified by a number of specific factors in each state. Property is distributed in divorce following one of two approaches: equitable distribution (not equal) or community property.

When it comes to spousal support, it has to be determined if there is an entitlement for spousal support. The purpose of spousal support is to limit the unfair economic effects of a divorce by having one spouse provide an ongoing income to a non-wage or lower earning spouse. It is intended to continue a duty to support. It is not intended to punish a “guilty” spouse. It is gender neutral in our society.

Courts are increasingly awarding less alimony and for shorter periods of time. Spousal support remains a controversial subject because it is a discretionary calculation and nearly different in each divorce. Some states embrace a new formula approach for alimony based on income disparity and length of marriage, much like child support formulas, and allow for factors to deviate from the formula. No matter what approach, Baby Boomers in long term marriages face a stark reality. With a limited number of earning years left, or if none, there is no income to share. Spousal support is interdependent on the rest of the financial pieces of the puzzle that fall into place for a final outcome. Hopefully, you have sufficient assets (including pensions, retirement plans, social security, etc.) to meet your living needs. Lastly, be sure you know that if you waive alimony, you forfeit forever your right to it after divorce. Alimony is generally taxable to the payee and tax deductible to the payor.

State property laws form the basis of property ownership. When spouses cannot agree on who gets what property, the courts to allocate it to them. In states of equitable distribution, equitable does NOT mean equal. Courts have discretion how to allocate between spouses, regardless of titling. The goal is to make sure property division is fair with respect to the contributions each spouse to the marriage and what each party needs after divorce. In community property states (there are 9), community property is divided EQUALLY between spouses and separate property is owned / kept by just one spouse. Dividing property in divorce is a one shot deal (rarely any retakes) and has no tax consequences at time of transfer.

So listen with a grain of salt to your friends, relatives, and colleagues about what you should be getting or giving in divorce. No one knows what is most important to you for financial security and peace of mind but you. Understand the divorce laws in your state. Advocate your needs properly, separate emotional from financial. Hire a team to educate you about pros and cons of financial decision-making during the divorce process. State divorce laws simply give you a foundation for ending your marriage contract and not a guaranteed outcome.