Estate Planning After a Grey Divorce

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!