Addressing Property Division Issues in a Gray Divorce
The common perception is that couples who are older and have weathered decades of ups and downs in their relationship will stay together forever. Of course, this is not always the case, and older couples do get divorced, even after 30 or more years of marriage. In fact, divorce among spouses over the age of 50 (known as “gray divorce”) has doubled since the 1990s, meaning more people approaching or in retirement must make major life changes.
Divorce between older couples may be more amicable, but different financial considerations come into play that need to be addressed. Regardless of the length of a marriage, spouses are required to divide marital assets and debts. However, older couples have less time to recover from the financial consequences of dividing everything by half, and they often have more complicated asset portfolios to distribute. Importantly, property division is rarely, if ever, revised by the courts after a divorce has been finalized, so getting it right the first time is crucial.
General Property Division Concerns
Illinois follows the equitable distribution model for property division in divorce that means marital property is divided according to what is fair, rather than strictly down the middle. Marital property includes anything acquired by either spouse during the marriage, as well as certain commingled marital and non-marital assets.
Classifying property as marital or non-marital is the central factor that will determine what assets are available for distribution, and these matters can become quite complicated if both spouses brought a number of separate assets into the marriage. Separate or non-marital property is not subject to division and generally includes:
- Property acquired before marriage.
- Gifts or inheritances.
- Property acquired after separation.
- Property excluded by a prenuptial or postnuptial agreement.
Once property is classified, the question then becomes how to divide marital property. Decisions will be driven by a court’s assessment of certain factors, including:
- The length of the marriage.
- The economic circumstances of each spouse.
- How much separate property each spouse owns.
- The reasonable ability of each spouse to acquire future income and assets.
- The tax consequences of property division.
Unique Issues for Older Couples
Turning to property division issues unique to older couples seeking divorce, retirement accounts are among the types of assets subject to division, but dividing 401(k)s, IRAs, and similar accounts is particularly tricky and subject to restrictive rules.
For example, annuities are increasingly popular among wealthy couples, but dividing them in divorce can lead to a significant loss in value, making it necessary to trade other assets to keep the division equitable. Further, splitting a 401(k) or IRA 50/50 may also not be advisable, depending upon when the account was acquired, the amount of contributions during the marriage and the retirement benefits held by the other spouse.
401(k)s should be divided using a Qualified Domestic Relations Order (QDRO) with the plan administrator to avoid penalties for early withdrawal, though income tax may still be due. IRAs should be addressed and divided in the divorce decree and submitted to the IRA custodian for distribution, but the potential tax consequences need to be understood before withdrawing any money. Pensions are subject to the terms of each employer and need to be valued before division to ensure the apportionment is fair. Importantly, each spouse needs to review the named plan beneficiary and change it accordingly to avoid giving the funds to an ex-spouse. An experienced divorce attorney should always be consulted before any agreement is finalized to avoid losing important rights.
Get Help From an Arlington Heights Divorce Lawyer
Divorce can be complex and difficult, but the stakes are often higher for older couples. If you are contemplating divorce and are worried about the financial reality of dividing your assets, talk to skilled Barrington family law attorney Nicholas W. Richardson to learn how equitable distribution applies to your situation. Contact our law firm today at 847.873.6741 for a free initial consultation.