Q. My parents are both 67 and they’re getting a divorce. They both seem really stressed about splitting up their assets because my mother didn’t work, so all their retirement money is in my dad’s name. How can I make sure my mom gets her fair share?
A. Divorces later in life, commonly called “gray divorces” for those over age 50, have some unique challenges.
Being a little older means those getting divorced have less time to recover financially, emotionally and socially from the split.
Your mom should engage a few financial professionals to help get through this difficult time, said Jody D’Agostini, a certified financial planner with AXA Advisors/The Falcon Financial Group in Morristown.
For the financial aspects of the divorce, she recommends you hire a certified financial planner who is also a certified divorce financial planner (CDFA). These pros are trained to assist in all the decisions the parties need to make related to the financial and tax implications of divorce.
“They can show you the long-term view so that the decisions you make are not only good for her now, but will allow her to provide for herself through retirement,” D’Agostini said.
Additionally, she said, your mom will need a good family law attorney to help guide her through the legal aspects, and a good therapist “so that the emotional side is healed and they can help mitigate the anxiety of this most emotional process.”
D’Agostini said you didn’t mention if your dad is still working or not.
“If he’s already retired, then alimony would not be an issue,” she said. “If he is, then alimony would come in to play, but only for the remainder of his working years, which may not be many.”
Either way, your parents assets and who gets what becomes paramount, as these assets generally will fuel the lifestyle going forward, D’Agostini said.
“Any assets that were obtained during the marriage are generally split 50/50 at the time of divorce, and that includes retirement assets,” she said. “Any split of assets pursuant to divorce is considered to be equitable distribution, and it’s an income tax free transfer.”
D’Agostini said it’s very important to consider what you need the asset to do. If the investments need to be restructured to generate income, there may be some tax consequences involved, she said.
If your dad has a pension, this is a marital asset that can be split, D’Agostni said.
Next would be to look at your parents’ liabilities, which generally speaking, are split in half, she said.
Then get a picture of your mother’s expenses going forward. She should look at her current lifestyle, and drop any expenses that she won’t have after the divorce, and add expenses she might need in this next phase, she said.
“I like to look at what her goals are as well,” D’Agostini said. “Where would she like to live and what does she envision the next phase of her life to look like? This will help project future expenses.”
Next, consider Social Security.
“Even though your mother hasn’t worked, she is entitled to a Social Security benefit which if she didn’t work for 10 years herself, would be half of your father’s Social Security benefit, so long as your mother is over the age of 62,” D’Agostini said. “There are claiming strategies that should be considered before collecting this benefit.”
Lastly, your mom will need to restructure her estate.
“She will need a new will to state how she wants her assets to be distributed, a health care directive to appoint someone to make medical decisions in her behalf if she becomes incapacitated, a general power of attorney to appoint someone to make legal/financial decisions in her behalf, and if she desires, a living will,” D’Agostini said.
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