North Carolina Estate Planning Blog

The Financial Impact of 'Gray Divorce'

Divorce at any age involves the sensitive matter of splitting assets and debt. For couples who divorce in their senior years (coined a “gray divorce”), not only are a lifetime’s investments subject to division, but the costs of long-term care (LTC) also become an even more important consideration. If an individual’s retirement account was compromised or investments drained by their spouse, separating and divorcing as a senior citizen may become emotionally and financially devastating.

Post-Divorce Financial Planning

 
Divorce for couples in their late 50s or 60s may involve division of joint assets, distribution of certain benefits and sources of income, and splitting of retirement accounts. While a couple is navigating a divorce and property settlement, not only can a divorce attorney provide crucial guidance, but financial planner as well. Many factors come into effect in post-divorce financial planning. A spouse’s eligibility to receive their partner’s property may hinge on the length of their marriage, when the asset was acquired, and other state laws unique to the couple’s primary residence.
 
Estate Plans and Long-Term Care Costs
 
Important financial planning decisions for divorcees late in life may affect an individual’s independence and well-being if their health should fail them and they have no one to provide care. Living with a reduced income or no income after a divorce leaves an individual vulnerable to rising healthcare costs.  How can gray divorcees reduce their financial risks and preserve their investments? What can divorcing senior citizens do to cover their LTC expenses?
  • LTC insurance and Medicaid planningA senior citizen facing divorce will have extra losses in addition to the emotional loss of their partner. A senior citizen who was relying on their spouse to care for them in their elderly years must create a new plan for LTC, which can be especially difficult if they don’t have other family or relatives to rely on. LTC insurance policies will help gray divorcees receive the healthcare they need—whether at home or in an assisted living facility—so that their caregivers and family members won’t carry the entire burden themselves. There are also LTC insurance policies that will provide 24/7 in-home nursing care. Most individuals in their late 50s or early 60s will qualify for more cost-effective LTC insurance policy rates than those who seek coverage later in life. Medicaid and Medicare cover many expenses for senior citizens around the United States, but they do not guarantee compensation for the full cost of necessary surgeries, prescriptions and nursing home care that aging Americans rely on. LTC insurance helps by offering additional compensation for specific expenses outlined in the insured’s selected policy. 
  • Create a strategic settlement plan and update an estate plan. Review every asset with an estate planning attorney to learn which are worth retaining and which carry long-term financial consequences. It may be more cost-effective to put aside emotional attachments to real estate or other joint property that could be expensive to maintain during a time when healthcare expenditures are imperative. An excellent time to create an estate plan or revise an existing estate plan is after the settlement agreement is finalized. At this point individuals will know exactly how joint assets will be distributed and will be able to forecast their monthly living expenses and income, assign new medical directives, and may qualify for new tax incentives.
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