Divorce Over 60? Here’s How to Safeguard Your Assets and Secure a Worry-Free Retirement

Divorce later in life, often called “gray divorce,” comes with unique considerations, especially when retirement assets and long-term financial security are at stake. In my 20 years as a divorce attorney, I’ve guided many individuals over 60 through the complexities of preserving their hard-earned assets during divorce. Here’s everything you should know to protect your future.

Gray Divorce and Its Financial Impact

Divorcing after 60 often means untangling decades of shared finances, lifestyle habits, and possibly family expectations. Gray divorce cases often focus on protecting retirement assets, securing alimony, and planning for future health and long-term care costs. For many, protecting retirement assets takes top priority, as rebuilding wealth at this stage of life is challenging.

What Makes Gray Divorce Unique?

Divorces after 60 differ from those at younger ages because they often involve longer marriages and shared retirement plans. In these cases, both spouses may have built an extensive financial life together, which can include multiple properties, investments, and possibly family businesses. Divorce after 60 also brings heightened concerns about alimony and health care. Alimony, or spousal support, may be essential for a spouse who was not the primary earner or whose work was focused on family support.

With a careful, informed approach, you can secure a financially stable future while preserving the assets you’ve built. Let’s look at how to protect your wealth and maintain peace of mind.

Asset Division in Gray Divorce – Key Considerations

In Florida, marital assets are subject to equitable distribution, meaning the court divides them fairly but not necessarily equally. Understanding what qualifies as marital property is critical, as it will directly impact your financial future.

Determining Marital vs. Separate Property

One of the first steps in divorce is identifying which assets are marital and which are separate. Marital property typically includes anything acquired during the marriage, from real estate and savings to retirement accounts. Separate property usually refers to assets owned before marriage or inherited assets that were kept separate.

However, after a long marriage, it’s common for separate and marital assets to become commingled, especially if funds were shared in joint accounts. For instance, if you owned a property before marriage but used marital funds to renovate it, part of its value could be considered marital property. A skilled attorney can help you trace the origin of assets and argue for fair division.

Protecting Retirement Accounts

Retirement accounts like 401(k)s, IRAs, and pensions often represent a large portion of marital wealth, and in Florida, they’re treated as marital assets if accumulated during the marriage. You may be concerned that dividing these funds will severely impact your retirement income.

A Qualified Domestic Relations Order (QDRO) is typically required to divide retirement accounts without penalties. A QDRO instructs the retirement plan administrator on how to divide the account. While the court considers a fair division, alternative assets can be negotiated in exchange for retirement funds in some cases.

For comprehensive information on QDROs, including their requirements and the process for determining their qualified status, you can refer to the U.S. Department of Labor’s guide, “QDROs: The Division of Retirement Benefits.” This resource provides detailed guidance on the division of retirement benefits through QDROs.

Preserving Real Estate and Investments

In long-term marriages, couples often accumulate multiple properties, such as vacation homes or rental properties. You’ll need to consider which properties are marital assets and evaluate if selling, keeping, or buying out your spouse’s share best fits your retirement plans.

Be cautious of tax implications when making investments. Dividing stocks, mutual funds, and other taxable investments can impact your tax bracket, so careful planning is essential to avoid unexpected tax burdens.

Planning for Health Care and Long-Term Care Costs

Healthcare costs become more pressing as we age, and securing health insurance post-divorce is essential. If you were on your spouse’s health insurance plan, divorce will likely mean finding new coverage. For many, Medicare will cover a portion, but you may need supplemental insurance.

Long-Term Care and Health Savings Accounts (HSAs)

If long-term care is part of your plan, consider how divorce may impact your ability to fund it. Long-term care insurance can cover expenses like nursing home or in-home care, but it requires planning and often a considerable premium. If you have an HSA, it’s possible to keep it post-divorce, but HSA balances are typically not split. Knowing your options for long-term care funding can be instrumental in securing peace of mind for the future.

Managing Social Security Benefits Post-Divorce

Social Security benefits can be a lifeline in gray divorce cases, especially for those who have limited retirement savings. If you were married for at least 10 years, you may be eligible to claim benefits on your ex-spouse’s record once you turn 62. Importantly, this won’t reduce their benefits.

Social Security for Non-Primary Earners

For those who did not work or earned less than their spouse, claiming benefits on your ex-spouse’s record can make a substantial difference in your financial security. You may qualify for up to 50% of their benefit if you meet the eligibility criteria, and these benefits won’t affect their payments. This benefit is especially helpful if your marriage spanned decades, as it provides an income stream during retirement.

Addressing Alimony in Gray Divorce

Alimony becomes increasingly important in divorces after 60, especially when one spouse is the primary breadwinner. Florida courts can award alimony based on factors such as the length of the marriage, each spouse’s financial situation, and their contributions to the marriage.

Types of Alimony Available

Permanent alimony is common in gray divorces, as it provides lifelong support for the financially disadvantaged spouse. Bridge-the-gap, rehabilitative, and durational alimony are also options, depending on your circumstances. The purpose of these forms of support is to help the receiving spouse maintain a standard of living similar to that during the marriage.

Negotiating a fair alimony agreement can help avoid protracted legal battles, which can drain financial resources and emotional energy.

Minimizing Tax Implications During Asset Division

Divorce after 60 brings unique tax considerations, especially around retirement accounts, investments, and alimony. Understanding these implications can protect your assets and help avoid unnecessary tax burdens.

Taxes on Retirement Account Withdrawals

Dividing retirement accounts can trigger tax consequences if not done properly. A QDRO is essential for avoiding early withdrawal penalties on retirement funds. Additionally, be mindful of the required minimum distributions (RMDs) if you’re approaching 73. An attorney and a financial planner can help you develop a distribution strategy that minimizes tax exposure.

Capital Gains Taxes on Property Sales

If selling real estate is part of your divorce plan, capital gains taxes may apply. Florida has no state income tax, but you could face federal taxes on significant gains. If you decide to sell the family home, the IRS provides a capital gains exclusion for primary residences, which could reduce the tax burden. Consulting with a tax professional before selling properties is a wise step.

Alimony and Taxes

Although recent tax law changes mean that alimony is no longer tax-deductible for the payer, it’s tax-free for the recipient. This change can impact negotiations, so it’s essential to understand how these rules affect your financial outlook.

Creating a Financial Plan for Life After Divorce

A gray divorce often demands a reimagining of retirement plans. Without a careful financial strategy, you may risk outliving your assets. Working with a financial planner can help you budget, invest, and plan for future healthcare and long-term care expenses.

Budgeting for a Single Retirement

After divorce, maintaining your lifestyle on a single income may require adjustments. A financial planner can help you evaluate your monthly expenses and suggest ways to cut costs without sacrificing your comfort. Retooling your budget can help stretch your retirement funds and provide a clear picture of your financial future.

Reassessing Investments

In some cases, you may need to adjust your investments to reflect a more conservative approach. As retirement approaches, a diversified portfolio with income-generating investments can provide stability. Working with an advisor, you can set realistic financial goals and explore investments that align with your post-divorce life.

Estate Planning Adjustments

Divorce after 60 has estate planning implications as well. You’ll need to revisit your will, powers of attorney, and beneficiary designations to ensure they align with your new circumstances.

Updating Beneficiary Designations

Many people forget to update beneficiaries on retirement accounts, life insurance policies, and investment accounts post-divorce. Failing to do so could mean your ex-spouse receives benefits you intended for children or other loved ones. Updating your estate plan is essential to ensure your wishes are honored.

Revising Your Will and Powers of Attorney

You may also want to consider appointing a new power of attorney or healthcare proxy if your former spouse filled these roles. An estate planning attorney can help you make these changes, ensuring your legal documents accurately reflect your wishes.

Consider Collaborative Divorce

For individuals over 60 seeking divorce, collaborative divorce offers a confidential, respectful approach to resolving complex financial and emotional matters. Unlike traditional litigation, where proceedings and sensitive financial details may become public, collaborative divorce focuses on keeping the process private.

How Collaborative Divorce Works for Gray Divorce Cases

In collaborative divorce, each spouse works with their own attorney, as well as financial experts and counselors if needed, to reach a fair settlement outside the courtroom. This method is especially helpful for preserving retirement assets and managing the division of long-term investments, as it enables both parties to tailor solutions that fit their specific goals.

Collaborative divorce can also reduce the emotional strain often associated with gray divorce. Focusing on open communication allows couples to find common ground, particularly on issues like alimony and asset division. This approach can be empowering for both spouses, ensuring they maintain control over critical decisions.

Benefits of Collaborative Divorce After 60

• Privacy: Collaborative divorce keeps negotiations and financial information private, which is important for older adults who want to safeguard their finances discreetly.
• Customized Solutions: This approach allows for creative and flexible solutions, such as retaining certain retirement accounts in exchange for other assets.
• Emotional Support: Collaborative divorce offers emotional support that can ease the transition and reduce conflicts. Counselors or mediators can be included as an option.

If you’re concerned about maintaining privacy and preserving assets, collaborative divorce may be an ideal approach for achieving a peaceful, equitable resolution.

Additional Reading

For those navigating divorce later in life, here are a couple of helpful articles to guide you through other important aspects of the process:

5 Things to Know About Hiring a Divorce Attorney in Orlando

Choosing the right attorney is crucial, especially in cases with significant financial stakes. This article covers the essential factors to consider when hiring a divorce attorney, from experience and communication style to understanding local laws and court systems in Orlando.

Can I Date During My Divorce?

Dating during divorce can raise questions about timing, impact on the case, and personal boundaries. Learn about the potential effects of dating on your divorce proceedings and what to consider to avoid complications, especially when financial and emotional stakes are high.

Is Collaborative Divorce Right for Me? Divorce Attorney Answers

If you’re considering whether collaborative divorce is the right option for your situation, our article provides valuable insights. It explores the collaborative divorce process in depth, highlighting its benefits over traditional litigation, such as increased privacy, control over outcomes, and a more amicable approach to resolving disputes. The article also helps you assess whether this method aligns with your personal circumstances, financial considerations, and goals for the future.

These articles can provide additional clarity as you make informed decisions throughout the divorce process.

Frequently Asked Questions

What Is Gray Divorce and Why Is It Becoming More Common?

Gray divorce refers to the dissolution of marriage among couples aged 60 and above. It’s becoming more common due to factors like increased life expectancy, financial independence, and changing social norms that make it more acceptable to pursue personal fulfillment later in life. These divorces come with unique challenges, especially concerning the division of assets accumulated over decades, retirement planning, and long-term financial security.

How Does Asset Division Work in a Gray Divorce?

In Florida, marital assets are subject to equitable distribution, meaning assets are divided fairly but not necessarily equally. Marital property includes assets acquired during the marriage, such as real estate, savings, investments, and retirement accounts. Separate property, like assets owned before marriage or inheritances kept separate, is generally excluded. However, after a long marriage, assets often become commingled. For example, if marital funds were used to improve a premarital property, a portion of its value might be considered marital. A thorough analysis by a skilled attorney is crucial to distinguish between marital and separate property accurately.

How Can I Protect My Retirement Accounts During a Divorce After 60?

Retirement accounts like 401(k)s, IRAs, and pensions are often significant assets in a gray divorce. To protect these accounts:

• Use a Qualified Domestic Relations Order (QDRO): This legal order allows retirement plan administrators to divide retirement accounts without incurring penalties or taxes.

• Negotiate Asset Trade-Offs: You might negotiate to retain full ownership of your retirement accounts in exchange for other assets of equal value.

• Understand Tax Implications: Be aware of how dividing these accounts affects taxes and required minimum distributions (RMDs) to avoid unexpected liabilities.

Consulting with a financial advisor and attorney experienced in gray divorces is essential to navigate these complexities effectively.

What Should I Consider When Dividing Real Estate and Investments?

When dividing real estate and investments:

• Assess Property Value Accurately: Obtain professional appraisals to determine the fair market value of properties.

• Consider Tax Consequences: Selling properties may trigger capital gains taxes. Understanding exclusions and tax obligations is crucial.

• Decide on Retention or Sale: Evaluate whether it’s financially feasible to keep certain properties or if selling and dividing the proceeds is more practical.

• Review Investment Portfolios: Analyze how dividing stocks, bonds, and other investments will impact your financial future, considering factors like risk tolerance and income needs.

Making informed decisions requires collaboration with legal and financial professionals who can provide tailored advice based on your specific situation.

How Does Divorce Affect Social Security Benefits After 60?

Divorce can impact your Social Security benefits:

• Eligibility for Spousal Benefits: If you were married for at least 10 years, you may be eligible to receive benefits based on your ex-spouse’s work record once you reach age 62.

• No Impact on Ex-Spouse’s Benefits: Claiming spousal benefits does not reduce or affect the amount your ex-spouse receives.

• Maximizing Benefits: You may receive up to 50% of your ex-spouse’s full retirement amount if you meet the requirements, which can be advantageous if you earned less during the marriage.

Understanding these rules can help you maximize your Social Security income during retirement.

What Types of Alimony Are Available in a Gray Divorce?

In Florida, several types of alimony may apply:

• Permanent Alimony: Provides ongoing support to a spouse who lacks the financial means to meet their needs post-divorce, common in long-term marriages.

• Durational Alimony: Offers support for a set period, not exceeding the length of the marriage.

• Rehabilitative Alimony: Assists a spouse in becoming self-sufficient through education or training.

• Bridge-the-Gap Alimony: Short-term support to ease the transition to single life.

Negotiating a fair alimony agreement is crucial to ensure financial stability, and it often requires careful consideration of both spouses’ financial situations and contributions during the marriage.

What Tax Implications Should I Be Aware of When Dividing Assets?

Tax considerations are significant in a gray divorce:

• Retirement Accounts: Without a QDRO, dividing retirement accounts may result in taxes and penalties. Proper legal procedures help avoid these issues.

• Capital Gains Tax: Selling assets like real estate or investments may trigger capital gains taxes. Understanding exclusions and planning sales strategically can mitigate tax burdens.

• Alimony Taxation: Post-2019, alimony payments are no longer tax-deductible for the payer nor taxable income for the recipient, affecting negotiation strategies.

Working with a tax professional ensures you understand and plan for these implications effectively.

How Can I Create a Financial Plan for Life After Divorce?

To secure your financial future:

• Develop a Budget: Adjust to a single-income household by analyzing expenses and identifying areas to reduce costs without compromising your lifestyle.

• Reassess Investments: Shift your investment strategy to align with your new financial goals, possibly focusing on income-generating or lower-risk assets.

• Plan for Healthcare Costs: Evaluate health insurance options, including Medicare and supplemental policies, and consider long-term care insurance if applicable.

• Consult Professionals: Collaborate with financial planners and advisors who specialize in divorce to create a comprehensive plan tailored to your needs.

A proactive approach helps ensure long-term financial stability and peace of mind.

What Estate Planning Adjustments Should I Make After Divorce?

Post-divorce, it’s essential to update your estate plans:

• Update Beneficiaries: Change beneficiary designations on life insurance policies, retirement accounts, and investment accounts to reflect your current wishes.

• Revise Legal Documents: Amend your will, trusts, powers of attorney, and healthcare directives to remove your ex-spouse if desired and appoint new representatives.

• Consider Tax Implications: Understand how changes in your marital status affect estate taxes and plan accordingly.

An estate planning attorney can guide you through these adjustments to protect your assets and ensure your intentions are honored.

What Emotional Considerations and Support Systems Are Important?

Emotional well-being is crucial during a gray divorce:

• Seek Professional Support: Therapists or counselors can help you process complex emotions and navigate the transition.

• Build a Support Network: Friends, family, and support groups provide encouragement and understanding.

• Focus on Self-Care: Engage in activities that promote physical and mental health, such as exercise, hobbies, and mindfulness practices.

Addressing emotional needs is essential for a healthy adjustment to your new life chapter.

How Can I Rebuild My Social Life and Find Fulfillment After Divorce?

Embracing new opportunities enhances post-divorce life:

• Explore New Interests: Pursue hobbies or activities you’ve always wanted to try, which can lead to personal growth and enjoyment.

• Engage with Community: Join clubs, volunteer organizations, or educational classes to meet new people and stay active.

• Set Personal Goals: Define what fulfillment means to you and create a plan to achieve it, whether through travel, learning, or other personal endeavors.

Rebuilding your social life fosters a sense of purpose and can make this new phase both rewarding and enriching.

Moving Forward with Confidence with a New Beginning After 60

Divorce after 60 presents challenges, but with careful planning and support, you can safeguard your future and find fulfillment in this next chapter. Taking the time to understand your finances, protect your assets, and plan for the future will help you move forward with confidence.

If you’re considering divorce and need guidance tailored to your unique circumstances, I encourage you to contact my office. With a personalized consultation, we can work together to create a strategy that meets your financial and personal goals, ensuring that you feel supported every step of the way.