Gray Divorce: Financial Strategies & Legal Insights from Industry Experts

This 20 minute conversation is packed with meaningful info for people navigating divorce after 50.

In a recent insightful conversation, Divorce Prep Coach Alex Beattie of The Divorce Planner sat down with Michigan-based family law attorney Jorin Rubin to discuss the unique challenges of "gray divorce" – divorces occurring among couples aged 50 and older. Their conversation revealed critical insights about navigating divorce later in life, from financial considerations to legal strategies. As this demographic continues to represent the highest percentage of divorces today, understanding these nuances becomes increasingly important.

Understanding Gray Divorce: The Fastest Growing Divorce Demographic

Gray divorce has become increasingly common for various reasons. As Alex notes in the conversation, many couples wait until their children are in college before addressing marital issues. Once the children leave home, couples often find themselves alone together, sometimes realizing, "Oh, maybe this isn't the way I want to finish up things," as Jorin puts it.

The decision to divorce later in life presents unique challenges that younger couples typically don't face. Understanding these challenges is crucial for anyone considering or going through a gray divorce.

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Employment and Financial Fears: The Primary Hurdles

One of the most significant challenges for those divorcing after 50 is employment and financial security. Jorin highlights that individuals who have maintained steady employment throughout their marriage are in a much more secure financial position than those who may have stayed home raising children.

For someone who has been out of the workforce for decades, the prospect of re-entering the job market in their 50s can be daunting. As Jorin explains, "It's very, very challenging for people... if maybe they're not getting the hugest settlement or it's not a modest settlement and they're thinking, 'Oh boy, I gotta go for 30, 40 more years with not a huge amount of money.'"

Alex emphasizes the importance of investing in yourself after divorce: "It's a great time to start investing in yourself... even just identifying areas where you're talented in, whether it's childcare or whether you had a career that you had prior to marriage, whatever it is, focus on something that could bring you not only joy but money as you're moving forward."

Social Security Benefits After Divorce: What You Need to Know

One of the most valuable insights from the conversation centers around social security benefits after divorce. As Jorin explains:

"You are entitled to 50% of your ex-spouse's social security benefit or yours, whichever is higher, if you're the right age... and you're not married, and you were married for 10 years."

This is crucial information for those divorcing later in life, especially for spouses who may not have contributed significantly to social security during the marriage. Importantly, claiming this benefit does not reduce or affect your ex-spouse's benefits in any way – a common misconception.

Retirement Accounts: Understanding the Complexities

Retirement accounts represent another complex area in gray divorce. In most states, including Michigan, the general rule is that the marital portion of retirement accounts is divided equally (50/50). However, several important nuances exist:

1. Pre-marital contributions: If you contributed to retirement accounts before marriage, that portion and its growth typically remains separate property. However, as Jorin notes, calculating the current value of those pre-marital contributions can be complicated: "Let's say you're married for 25 years, but you worked for Ford for five years before that and you accrued $15,000. Well, how much is that $15,000 worth 25 years later? It's hard to figure out."

2. Different types of retirement accounts: Divorcing couples might have various retirement vehicles, including 401(k)s, SEPs (for self-employed individuals), and traditional pensions (defined benefit plans). Each is handled differently during divorce.

3. The tax implications of withdrawals: As Jorin warns, withdrawing from retirement accounts can trigger significant tax consequences: "If you're going to roll it over but you need the money... you're going to have to pay what they call ordinary income tax when you pull the money out. So $100,000 is going to be... if it's going to put you into the higher tax bracket for the year that you withdraw the money, you're going to be paying $30,000, $35,000 of taxes."

4. The importance of a QDRO: A Qualified Domestic Relations Order (QDRO) is a critical legal document that instructs retirement plan administrators how to divide the assets. Alex explains that this document "gets filed with the judgment," allowing for tax-free transfers between spouses when handled correctly.

5. Surviving spouse benefits: Jorin highlights an often-overlooked aspect of retirement division: "When you're doing the QDRO... you have to specifically say whether or not you are the surviving spouse." This designation determines what happens to benefits if either spouse dies after the divorce. Without proper planning, benefits might revert to the account owner rather than going to the ex-spouse's estate as intended.

Valuing Complex Assets: Family Businesses and Beyond

For couples who own businesses or complex investments, the divorce process becomes even more complicated. Jorin explains that valuing a family business typically requires specialized accountants who provide a "snapshot in time" valuation.

However, this approach has limitations. Jorin shares a cautionary tale: "I had a case and the man made these hooks that go on the back of a truck... the value of the company was a million dollars when we did the divorce. Well, guess what? Two years later, this guy turned around, and it was so niche that Ford wanted this company so much they didn't pay two million... they paid 20 million."

To protect against such scenarios, Jorin recommends considering a "clawback" provision in your settlement: "That's one thing we use, which means you try to say, 'Look, we're valuing it in 2025, but if you end up selling it in the next, depending on how long your marriage was, 3 to 5 years, 10 years, I'm going to get a portion of it above what we valued it at.'"

Spousal Support in Long-Term Marriages

The length of marriage significantly impacts spousal support determinations. While some states have specific formulas, Jorin explains that Michigan considers various factors, with the length of marriage being a crucial one.

"Obviously, if you're married three years, I can barely get spousal support unless it's a very big difference in the income. But if you're married 20 years and you've relied on a particular person for your living expenses, it's a much more powerful and much more important factor when you're calculating spousal support."

Alex addresses a common misconception about lifelong alimony: "There's this old narrative that when we're talking about spousal support... if you've been in a long-term marriage, that it's automatically locked in for life. That it all depends on the length of the marriage. So don't go into that assuming that you're going to be paying for the rest of your life or that you're going to be receiving."

She also reminds those receiving spousal support to consider tax implications, which vary depending on when the divorce occurred and state regulations.

Estate Planning: An Urgent Post-Divorce Task

Perhaps one of the most overlooked aspects of divorce is the need to immediately update estate planning documents. Jorin emphasizes, "They should definitely, no matter how old they are when they get their divorce, redo their estate planning."

This includes:

• Dissolving joint trusts

• Creating new wills

• Updating beneficiary designations on all accounts

• Considering a trust if you own property to avoid probate

  
  

As Alex notes, "If you for some reason did not have a will, this is the time at divorce to really put one in place to make sure that your assets are allocated the way that you want them to be."

Financial Planning: Looking Decades Ahead

Throughout the conversation, both experts emphasize the importance of detailed financial planning during divorce. As Alex puts it, "When we're doing the financial planning, it's always with an eye of how's this going to affect me in five months, five years, 15 years."

This forward-thinking approach includes:

• Projecting retirement needs

• Planning for healthcare costs (especially if you've been on your spouse's insurance)

• Calculating the true value of different types of assets

• Building a budget that accounts for your new financial reality

Preparation is Key

As Alex reminds viewers, "The truth of the matter is... there's an emotional side to divorce and there's a business side. You need to separate the two and address them both."

By approaching divorce as a business transaction – essentially the dissolution of a partnership contract – individuals can make clearer, more strategic decisions about their futures. With proper preparation and guidance from professionals like Alex Beattie and Jorin Rubin, even those facing gray divorce can navigate this challenging transition successfully.

As Alex concludes, "By educating yourself and preparing for consultation, no matter what happens, you're going to be in a position where you know what to expect moving forward."

This blog post accompanies the interview between Alex Beattie, Divorce Prep Coach and founder of The Divorce Planner, and Michigan-based family law attorney Jorin Rubin. For more resources on divorce preparation, visit The Divorce Planner.