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A divorce always represents a tough transitional life-change for a couple. But when they are over 50, the dynamics of finding a suitable property division agreement are all the more difficult. In Michigan and nationwide, the incidence of marriage breakups for couples over 50 is now about 25 percent whereas in 1990 it was only about 10 percent, according to a paper recently published by a state university.
A big issue being raised for older divorcing couples is the funding of retirement for both of them. It follows that asset selection at the time of negotiating an agreement can become critical. In some situations, a person may get a greater share of the assets but not do as well. For example, if the spouse who is less of an income producer takes the house, that asset is not going to be liquid when cash is needed to live.
Or, a spouse may take all or most of the qualified retirement funds such as the IRA’s and 401(k) plans. Again, however, if the person needs liquid assets he or she will pay substantial penalties for cashing in retirement funds prior to age 59.5. Another consideration is that the capital gains exclusion for selling a house is much more generous when a married couple sells it as marital property than if it is sold by a single divorced person.
Therefore, in some cases it may be more prudent for the couple to sell the house prior to the divorce. All in all, when a party over 50 is engaging in property division negotiations in Michigan the person will likely want to pay close attention to specific needs and goals prior to accepting assets that may turn out to have a counter-productive impact on those future circumstances. As is always the case, the benefits and advantages to be gained in any division of marital property will depend on the facts and circumstances applying to each particular situation.
Source: New York Post, “Divorce rates for married couples over 50 exploding, creating difficult financial issues for many older Americans,” Gregory Bresiger, Feb. 18, 2013
