With divorce becoming more common and people living longer, the incidence of late-life divorce is on the rise. Along with it comes an often unforeseen casualty: retirement savings. If New York couples are like most, they plan and save for retirement with the supposition that they will be spending it together. When divorce means that is no longer the case, even the best financial planning can be spoiled.
Separation late in life means a division of wealth and assets accumulated over a lifetime, as well as a doubling of expenses that comes with living separately. These financial aspects can make individuals feel overwhelmed, leading them to panic and make sometimes reckless decisions about property division. This can be tricky, however, as there’s more to an asset than just its face value. For example, real estate may have a different growth and thus a different future value than a deferred retirement account, and withdrawal from regular IRAs versus Roth IRAs is going to have differing tax consequences.
Some advisors suggest that one possible way to look at a marriage is as a business partnership with all the contracts that come along with it. A prenuptial agreement can prepare both partners for the financial ramifications of divorce. If there is no prenuptial agreement in place, there is the option of a postnuptial agreement, deciding these issues after the wedding has already happened. As couples are planning for retirement, they can plan at the same time for the possibility of divorce so that stipulations will already be in place.
New York is an equitable distribution state. This means that, when a couple divorces, their assets and shared marital property will be divided in a way the court deems fair, but not necessarily in a 50-50 split. An attorney with experience in family law can offer valuable advice during divorce proceedings to help individuals avoid common financial pitfalls.
Source: Chicago Tribune, “How to tackle finances during divorce”, Martha M. Hamilton, Dec. 2, 2016
