With average age expectancy extending beyond 80 years, it is becoming increasingly common for couples to divorce in retirement. But when you have been married for thirty or forty years, dividing matrimonial assets can be complex because it involves unravelling decades of financial intertwinement.
Divorcing in retirement requires careful consideration of assets that have been built up over a lifetime together. The family home, pensions, investments, and other finances will all need to be taken into account and shared fairly. It is therefore crucial to go through everything carefully to ensure the best outcome for both parties. This article discusses what you should consider when divorcing in later life.
What will happen to our matrimonial assets if we divorce in retirement?
Getting divorced in retirement will mean that the family assets have to be divided, and while this is a necessary requirement of any divorce, the value of such assets in a longer marriage is likely to be greater. This is especially pertinent when it comes to pensions and family homes. In addition, generational differences could mean that some retirees have little in the way of personal wealth if they looked after the family and didn’t work outside the home. Here, spousal maintenance may be required.
The factors that are particularly relevant to those divorcing in retirement include:
- The length of the marriage
- Financial contributions to the marriage
- Future financial needs
Ideally, you should try to reach a financial settlement with your ex by enlisting the help of solicitors and mediators to resolve the dispute. But if you can’t reach a mutual agreement, the case may need to be handled by the court. This can be costly and stressful, so should always be considered a last resort.
Will I have to pay spousal maintenance?
Depending on the assets available and the income generated by pension sharing, spousal maintenance may still be required by one party to address any remaining imbalance. Essentially, the older the parties, the more likely it is that a joint lives maintenance order will be made. Here, payments continue throughout the joint lives of the parties until further order of the court or the person receiving the payments remarries. If there is a change of circumstances, either party can apply to the court to vary the amount payable upwards or downwards. It is also possible for either party to apply for the maintenance to be “capitalised”. This means that the payer pays a lump sum payment to replace ongoing spousal maintenance payments.
What happens to my pension?
If you are divorcing later in life, it is likely that you will need to share your pension. There are various ways this can be achieved, from a simple division, known as “pension sharing ”, to “earmarking” funds to be shared at a later date. Another option is “offsetting”, where one party retains their pension in return for the other keeping an asset of equal value, such as the family home. Given the often high value of pension pots and the complexity of pensions in general, it is often worth taking specialist advice to determine the best course of action. This is particularly important where final salary schemes are involved, which can add another layer of complexity.
While equal division is usually the starting point when separating retirement funds, there are other factors that can affect the final arrangement, including if:
- The marriage was too short to share the pension equally, such as in later life second or subsequent marriages.
- The pension fund is very small
- The fund was accumulated before the marriage or after the separation
Will I have to move out of our home if I get divorced in retirement?
The family home is probably the biggest source of anxiety for anyone getting divorced, because one or both parties generally have to leave. Yet this could prove even more problematic for those in retirement. Taking out a mortgage is a lot more restricted for those in later life, which means if one party hopes to buy out the other and needs a mortgage to do so, they are likely to face stringent affordability criteria.
Another option could be to sell the home and buy two separate properties, ideally outright, in order to avoid the need for borrowing altogether. For those looking to unlock equity in the family home without selling or taking out a mortgage, equity release could be a solution. However, this should not be done without first taking specialist advice as to the legal implications of such action.
How are joint finances untangled following a long marriage?
In a long marriage, there are likely to be a myriad of joint finances that need to be untangled such as joint bank accounts, as well as credit cards and household bills. It is important to contact the relevant organisations to make them aware of your circumstances and start the process, either by removing one party from each account, or cancelling everything and starting from scratch. You should make sure that all bills continue to be paid on time as this can affect one or both party’s credit score. Additionally, you should always inform the other party before closing any joint accounts, so they are not taken by surprise.
You may also want to ensure that your ex cannot withdraw any savings from joint accounts or run up more debt on credit cards while financial matters are being sorted out. Here, you may want to consider freezing any joint accounts, although this also prevents you from using the funds too. In extreme circumstances, you may need to apply for an injunction to stop your ex from disposing of any assets pending the outcome of financial proceedings.
It should be said that a joint account does not have to be closed if you are both comfortable continuing to operate it. This will not work for all couples, particularly if there are trust issues, but it can be an elegant solution for some.
What should I do about my will?
A will is always going to need to be rewritten if you are going through a divorce, no matter your age. But older divorcees will need to take an even closer look at all the relevant financial agreements, such as life insurance policies that may have been taken out years before, and pensions that may have been forgotten about, and the beneficiary changed accordingly.
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