Financial complications common in late-life California divorces

For Californians seeking gray divorces, properly characterizing and dividing marital property to support independent living after divorce is rarely simple.

Divorce can introduce distinct financial issues at virtually any stage in life. Couples usually must worry about dividing assets, minimizing tax losses and planning financially for living independently afterward. For Sacramento couples who are preparing for "gray divorces," or divorces after age 50, these challenges may be especially pronounced.

In California, divorcing spouses can reach their own arrangement for dividing property. Otherwise, each spouse is entitled to half of all "community property." This is most property acquired during the marriage, aside from inheritances and gifts. These guidelines may sound simple, but identifying marital assets and appropriately dividing them can be complex. Unfortunately, the consequences of a poor division may be severe for older couples.

Challenging property division considerations

The New York Times explains that asset division can be difficult during gray divorce for a few reasons. Older adults often possess complex assets, such as pensions, which can only be divided with qualified domestic relations orders. To ensure an appropriate division of these assets, spouses often must work with both a financial planner and an attorney.

Correctly identifying and valuating marital property can also be an issue during gray divorce. Older couples usually have accumulated more assets, which makes valuation a time-consuming task. These couples may also be more inclined to overlook marital assets. This may occur because spouses have forgotten about certain assets or failed to fully understand their right to those assets.

Some spouses may also delay financial planning while dealing with emotions that usually come with divorce, such as depression. For many spouses, focusing on financial issues or fighting for a greater share of marital assets may seem like secondary concerns. However, spouses who fail to plan financially and pursue their share of assets may face significant hardship after the divorce.

Consequences of a poor settlement

As The New York Times notes, after a divorce, a spouse's retirement savings are essentially cut in half. This is a significant issue for older spouses who have limited time to work and make up for any financial deficits. Additionally, divorced spouses don't face the same costs as married spouses. Divorced singles typically must cover greater expenses on various costs, from housing to insurance.

According to USA Today, the increased costs of living alone can add up to a significantly more expensive retirement. A single divorced spouse may pay 30 to 50 percent more to retire than a married spouse. To address these increased expenses, many divorced spouses must take at least one of the following measures:

  • Postpone retirement or return to work
  • Reduce expenses in order to save more before retirement
  • Plan on a more frugal retirement

A fair division of retirement benefits and other property may not completely eliminate the need for these measures. However, it may help ease some of the financial burdens that spouses face after gray divorce.

In light of these financial complications, anyone who is preparing for a gray divorce should consider speaking to an attorney. A family law attorney may be able to offer advice on characterizing, valuating and dividing community property. An attorney may also help a spouse work toward a settlement that protects his or her financial interests.

Keywords: divorce, retirement, assets