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50 "Shades" of Gray Divorce

Posted By Jacqueline Roessler, Tuesday, April 19, 2016

 ‘Gray divorce’ cases raise new financial questions for their attorneys.

A recent Bowling Green University study reported that an astonishing 25% of all new divorce cases filed are by those age 55 and older. Is this the result of changing attitudes towards marriage and monogamy amongst the so-called “Baby Boomer” generation? 
 
Regardless of the reason, divorce legal and financial professionals need to sharpen the tools in their toolbox to handle some of the particular financial issues affecting gray divorce.

The first consideration that bears looking at in a new light relates to Social Security income. John, for example, is entitled to receive $2,600 per month at his age 66. Mary, a stay-at-home mom, will receive half of John’s benefit ($1,300) at her age 66 - John still keeps his full $2,600. As long as a divorced couple was married at least 10 years, each spouse is entitled to 100% of their own Social Security benefit or 50% of their spouse’s, whichever is greater. In most states, within the context of divorce, Social Security is viewed as an entitlement, not an asset of either party. Therefore, if one spouse has a larger benefit than the other, that's generally ignored in the overall settlement. To put this into context, if one party retains 100% of their monthly pension benefit, they are generally required to pay the other party an offset from other assets. Of course, Social Security is not assignable in the way that a qualified pension plan is.  However, it still constitutes an income source you can't outlive. For an aging couple who had a long term marriage, Social Security income can be a substantial portion of their combined income. Therefore, Social Security income equalization (in the form of permanent alimony) may in some states be considered  reasonable consideration in these matters.

Very few people are aware of the many ways to maximize their Social Security income. Divorced couples in particular have access to certain loopholes that can provide enhanced income over their lifetime. One example is that a divorced spouse may be able to collect spousal benefits (50% of their ex's benefit, reduced for early commencement) beginning at age 62. Upon attainment of age 66, they can switch to receiving their own (unreduced) benefit for life. That certainly complicates the question of how to equalize Social Security income via alimony.

Gray divorce professionals need to view the alimony equation through a different lens. In most jurisdictions, it's generally assumed that alimony will cease at  “normal retirement age.” However, as life expectancies lengthen, what is the new "normal?"  Forget about 65.  Many people continue to work well past the age of 70 or 75. The cessassion date for alimony in some states may be a necessary negotiation point in divorce today. Let's suppose that Michael intends to pay Susan alimony until he reaches age 65 (normal retirement age). When he turns 65, he may be surprised to learn that Susan may expect to receive alimony as long as he continues to earn wages. If there's ambiguity in the Judgment of Divorce, the resolution may only be found through post-judgment expenditures by both sides.

Of course, this is just the tip of the iceberg; required minimum distributions, tax considerations and pensions in payout status are other significant financial concerns affecting gray divorce. I'm excited to present with my colleague, Melissa Joy, CFP of the Center for Financial Planning on "Social Security Benefits and Gray Divorce" at the upcoming Divorce Catalyst Conference in October as we delve deeper into the finances of "gray divorce." 

Tags:  alimony  divorce catalyst conference  elder divorce finances  gray divorce  pensions  Social Security Spousal benefits 

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Life Is A Window To Financial Resolution

Posted By Karen Sparks, Tuesday, April 19, 2016

Recently, I was dispatched by my daughter to attend the senior project presentations at her former high school.  She is finishing her freshman year at Northwestern University and her finals schedule did not permit her attendance to support her friends graduating this year so I became the virtual representative.

All of the offerings for the class of 2015 were creative, thoughtful and diverse.  One presentation in particular caught my attention.  The subject was “The Art of Vulnerability”.  I have always been interested in the many facets of the human condition so I was intrigued to see how this topic would be handled within the window of a 30 minute presentation.

The senior, who we will call Thomas, took us on a journey led by the definition of Sonder- the realization that other people’s lives are as complex and vivid as our own.  He led us through interactive mini skits illustrating how we ask questions but often are not really interested in the answer someone is giving. Or, in a group setting we are hesitant to participate for fear we will be rejected or mocked. In general, he stated that we really don’t take the time to find out the stories behind the person nor are we willing to open up ourselves for someone else to speak into our lives.

As I sat there listening, it was interesting to note how this topic affects the work that we do as divorce finance professionals.  Individuals are seeking our expertise at a time in their life which is very vulnerable-the dissolution of their marital relationship.  The question is, are we taking the time to understand the complex lives of our clients and how that complexity drives the analysis and allocation of their financial assets?  If not, this is certainly food for thought before you might be tempted to break out that software and calculator to jump into your financial analysis.

As a certified divorce financial analyst, I continue to find it to be beneficial to let the journey of the client and the numbers inform how I provide professional services.

Interacting with my peers also gives me a window to many client scenarios and solutions which I can apply to my practice.  One of the most meaningful professional connections for me since 2013 has been the yearly conference by the Association of Divorce Financial Planners which provides an excellent platform for networking and knowledge.  This year’s Divorce Catalyst Conference held in conjunction with Center for Mediation & Training in New York from October 1-4, 2015  will have over 50 workshops on topics such as tax, retirement, real estate, post- and pre-nuptial agreements just to name a few.

I highly encourage divorce financial planning and other divorce professionals to attend this conference as the unique mix of information (along with the mediation prospective) and the opportunity to meet and share practice stories with others is invaluable.  So, please consider setting this time aside in October for a great experience!

Tags:  Center for Mediation & Training  divorce catalyst conference 

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