Over the past several decades, the phenomenon of "gray divorce" (dissolving a marriage after age 50) has become one of the most significant demographic changes in American family life. According to the National Center for Family & Marriage Research, the divorce rate among adults aged 50 and older has approximately doubled since 1990, and for adults aged 65 and older it has roughly tripled.
In most cases, long-term dissatisfaction with the marriage reaches a tipping point, at which one or both spouses refuse to spend the last chapters of their lives in the same unhappy circumstances. The goal, of course, is to get free without introducing a whole new set of unhappy circumstances. High net-worth couples often underestimate that risk. They feel they have sufficient wealth to insulate themselves from the challenges of divorcing later in life. That can be true, but it’s also possible to make mistakes in the divorce process that inflict lasting financial consequences you’ll find difficult to live with. A happy outcome to a gray divorce requires sound legal advice, detailed planning, and precise execution.
Why the Stakes and Strategy Differ From an Early or Mid-Life Divorce
Fans of college football know that a loss early in the season is not nearly as costly as a loss later on. Teams taking an L in September have time to turn their fortunes around. But by November, the team’s identity is set. A late-season loss can knock them down in the rankings and eliminate the team from playoff contention. The same can be true for your finances. A business setback in your 20s through 40s can hurt, but it doesn’t have to be fatal. You’ve got decades of solid earning potential ahead. You might have to work harder for a bit longer than you had hoped, but there’s still time to achieve your retirement goals.
Now, let’s apply that reasoning to divorce. Even affluent couples don’t have unlimited resources. Their finances are complex and intertwined, so arriving at a fair and reasonable settlement can be challenging. A costly divorce after age 50 can drain your finances, including your retirement assets, forcing you to work far into the future. If you have been a nonworking spouse, your situation is even more precarious, because you don’t have the earning capacity to recover your standard of living, much less maintain it past retirement age. With less time to rebuild, you must take scrupulous care to avoid unnecessary losses.
The Emotional Dynamics of Gray Divorce
Older couples generally initiate a gray divorce thinking it will be less emotionally taxing than an earlier divorce, involving minor children and more tenuous finances. But they don’t give adequate consideration to the totality of their life circumstances. True, older divorcees don’t have to break the news to children of tender age. There is no stress over crafting a parenting plan, vying for custody, and worrying about how the divorce might disrupt your children’s lives. But that doesn’t mean there are no emotional consequences.
Your adult children will still have feelings and opinions about your divorce, which might cause conflict. Family gatherings, especially around holidays, will require greater planning. If you have grandchildren whom you see frequently, they might question why their grandparents are no longer together.
If you own and operate a family business, feelings about your divorce can affect morale and operations. Your divorce can affect how your children feel about continuing to participate in the business. This can affect your company’s succession plan and your children’s legacy.
Older divorcees are also not immune to other emotional challenges, such as the impact of the divorce on their social network. As with your finances, it can be difficult to recover from the sudden loss of connection with people in your community. While it’s possible to meet new people at any age, deep friendships that form the bedrock of our support network can take decades to develop. Having to “start over” later in life can lead to loneliness and an unhealthy feeling of isolation.
It’s important to understand the potential emotional challenges because throughout your divorce, you have to be in the right frame of mind to make sound decisions. If you go into your divorce expecting the process to be easy, you can be blindsided by emotions you didn’t see coming. This can lead to emotional decision-making that undermines your pursuit of a swift, fair, and cost-effective settlement.
Asset Division Complexities Specific to Long, Wealthy Marriages
One paradox of wealth is that it can cost so much to maintain. Marital wealth is often intertwined in complex ways, making it difficult to separate and distribute equitably. Here are a few of the complexities you must deal with to protect your property rights in divorce:
- Business valuation — It’s often difficult to put a price on a business, given shifting market dynamics. Six months after a valuation is done, the results can be invalid. It can also be difficult to apportion ownership between spouses if both have participated in building and operating the company.
- Executive compensation — Contracts for executive talent often include perquisites that vest over time, such as stock options, RSUs, deferred compensation, carried interest, and severance packages. The current value of a package and the other spouse’s equitable share can become bones of contention.
- Real estate — Various holdings, including the primary residence, vacation homes, and investment properties, require valuations. Buyout logistics can be complex, especially if a hurried sale would deliver less value for the property.
- Retirement accounts — 401(k)s and pensions accumulate over decades. Apportionment must consider the dates of contributions and growth.
- Hard-to-value assets — Art, antiques, collectibles, jewelry, and other items can yield competing valuations, leading to disputes.
- Stock portfolios — Similar to retirement accounts, these investments require intricate calculation to divide equitably.
- Assets placed in trust — Once the grantors settle a trust, there may be restrictions on how those assets can be distributed.
Finally, we must consider property, such as inheritances, that appears, at first glance, to be separate property. Depending on how the property was managed, there may be a question of commingling, which could return the property to the marital estate for distribution.
Post-Divorce Expenses to Consider
Divorce at any age changes how family resources are spent. The most obvious change is having to pay for two primary residences. In other categories, we find that items are more expensive when purchased individually than when purchased in pairs. However, the areas that force the greatest reallocation of resources include:
Spousal support — Marriages of long duration generally trigger alimony, which can be lifelong or indefinite, depending on circumstances. In determining the amount of alimony, courts consider the standard of living enjoyed during the marriage and seek to maintain the dependent or low-earning spouse at that level. Alimony also has tax consequences that have changed significantly since the passage of the Tax Cuts and Jobs Act in 2017.
Retirement and healthcare timing issues — Divorce can change your retirement timeline. In many cases, parties decide to work beyond their previously determined date to make up for lost assets. Continuing to work often maintains healthcare benefits, though dependent spouses might be removed from plans, and other provisions must be made for their coverage. This can be a pivotal consideration in your divorce settlement if one spouse, especially a dependent spouse, is in poor health.
If you choose to retire on schedule, you can transition from private insurance to Medicare, but you’ll still need gap coverage. Though you might not need Social Security for survival, you should investigate when the best time for enrolling would be. Dependent spouses should inquire about eligibility for spousal benefits, subject to the 10-year marriage rule. If you are not in a hurry, consider timing your divorce around the vesting of employment benefits.
Estate planning fallout — Divorce generally affects planning for retirement and legacy planning. Now is a good time to review wills, trusts, beneficiary designations, and powers of attorney to make the appropriate adjustments. Some designations, such as irrevocable trusts, require additional steps and negotiation with affected parties. If your divorce will affect your succession plan for the family business, now is the time to consult all stakeholders and modify that plan to reflect the new circumstances.
Guarding Your Privacy and Reputation
Although a gray divorce doesn’t generally provoke scandal, it can have an impact on your public persona, which you might want to protect for professional and personal reasons. Mediating your divorce avoids creating a public record of the proceedings. You can further safeguard your privacy by entering into confidentiality agreements and by asking the court to seal its records. The more discretion you employ, the less your divorce can impact your business relationships. This is especially important if you are considering board positions or maintaining a public profile in retirement.
Applicability of Marital Contracts in Gray Divorce
New York does not set expiration dates for prenuptial or postnuptial contracts. You might think a prenup you signed 40 years ago must be obsolete, but New York courts will enforce the agreement, provided:
- The contract was valid at the time of its creation
- Enforcement now would not be unconscionable
Therefore, a spouse who wants to invalidate a marital contract must generally show there was fraud, duress, coercion, lack of representation, marital waste, unequal bargaining power, or some other factor that would invalidate the contract. However, if the circumstances at present are such that enforcement would be fundamentally unfair to one party, the court could set the agreement aside. For example, suppose that at the time of the marriage, each spouse had a thriving career, so they included a no-alimony clause. But, for the last decade, one spouse has been disabled, unable to work, and totally dependent financially on the other. A court could decide that alimony was appropriate despite the agreement.
Choosing the Legal Team that Can Best Serve Your Needs
When a spouse in a high-net-worth marriage pursues a gray divorce, success usually requires a coordinated team: an experienced divorce attorney to lead negotiations and guide the litigation strategy, a forensic accountant to ensure there is no hidden income or assets, a financial advisor/tax specialist to determine the best ways to preserve wealth while transferring assets, and a business valuation expert to determine how much a closely held company is worth.
Of course, any time you assemble a team of professionals, their services come with a price tag. This is why you must choose a reputable attorney who will put your needs first. Your attorney must be more concerned with protecting your rights and your financial future than with generating revenue for the firm. Many parties to divorce believe that if they’re going to protect their assets, they need an aggressive litigator who will fight over every item on their wish list. Unfortunately, you might stand to lose more in litigation costs than you hold onto with a favorable judgment. Bitter court battles can also damage relationships that are more important than the possessions you fight over.
Attorneys who regularly handle affluent divorces know when to fight and how to negotiate. They deftly pursue less confrontational strategies, such as mediation or collaborative divorce, which enable fair settlements at a fraction of the cost of drawn-out litigation. Your legal team must be capable and forthright, providing a realistic vision of your situation and a reasonable path towards achieving your goals.
Facing a Gray Divorce? Protect Your Wealth Before Making Critical Decisions
The decisions made during divorce can affect your retirement, investments, business interests, and estate plan for years to come. Before agreeing to a settlement, work with a legal team that understands the complexities of a high-stakes divorce. Contact our team today at 212.682.6222 or online.