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Late-Life Divorce

There can be so much to look forward to after retirement: more free time, traveling, enjoying an empty nest, perhaps. But sometimes life is not so idyllic, and divorces between older people are happening more frequently. In fact, divorce rates among couples over the age of 50 are rising, perhaps in large part due to more progressive values that do not stigmatize people separating when the relationship is no longer working or fulfilling. Here are a few things to consider if you face a so-called ‘grey divorce’ in NJ.

Get a Lawyer

A grey divorce in NJ will typically involve a couple that has been in a long-term marriage, meaning they have had decades to accumulate assets and debts than in a shorter-term marriage. The majority of the couple’s wealth is likely tied up in real property and retirement, all of which can be fairly complex to divide and calculate. Hiring a lawyer will ensure that you get an accurate and fair valuation of the community assets, as well as providing you with a reasonable division of property. Parties involved in a grey divorce have less time and resources to make up for any losses they might suffer in the divorce. Getting a lawyer who understands your needs and perspectives will go a long way in ensuring you are able to plan not just for life after divorce, but the rest of your life.

Understand Retirement Options and Their Tax Consequences

In many cases, a grey divorce in NJ might have one party that has been the primary breadwinner of the family. Perhaps they have contributed to the bulk of the retirement in their own account. Courts will not punish the spouse who has stayed home or sacrificed their career to support their family by preventing them from having an equitable share of the retirement. However, it is important to understand the potential ramifications of dividing up retirement accounts. Depending on what kind of retirement account you have will determine how it is divided. Independent Retirement Accounts, or IRA’s, can be rolled over to the other spouse’s own account – however, if they need to access it earlier, they will have to pay taxes on the additional income as well as a 10 percent early withdrawal tax penalty. A Qualified Domestic Relations Order, or QDRO, allows a one-time withdrawal from a 401(k) without penalty, although there might still be income tax consequences. Anytime retirement is to be divided in a grey divorce in NJ, it is crucial to ensure you understand the procedures and documents required to properly transfer the property.

Additional Benefits

On top of retirement, parties to a grey divorce in NJ might be eligible for Social Security spousal benefits, depending on their partner’s employment history. Former spouses might also be entitled to these benefits, so beware if your partner was previously married. For a former spouse to be eligible, the marriage must have lasted at least 10 years, and the spouse claiming the benefits cannot also be currently married. The claimant must usually be at least 62 years old. Spouses should also consider the availability of health care, particularly in their twilight years. If the spouse is not yet able to receive Medicare, they could be faced with the loss of benefits derived from their spouse’s employer or former employer, meaning they are without affordable healthcare. Older individuals generally face much higher healthcare costs than younger people, so health care options must be considered by parties in a grey divorce in NJ when dividing up assets. This could be crucial for individuals who have terminal illnesses or are dealing with ongoing health problems.

Real Property

The marital residence may be the largest asset of a grey divorce in NJ, perhaps second only to the retirement accounts. The parties will no longer be sharing the home, so it is important to consider not only who will receive the property itself, but how to divide up the equity in the home as well. If there is still a mortgage on the home, one party might need to refinance the loan in his or her sole name. Sometimes, if the income of the parties is split after the divorce, this can be difficult or impossible. There are also other expenses associated with real property, such as property taxes, insurance, and general upkeep that can be difficult for an individual who is retired to manage on their own. Determining who should keep the property, or whether it is better to sell it off and share the proceeds can be a major decision when parties decide to divorce in their later years.

Estate Planning

A lot of clients take estate planning for granted. In New Jersey, if someone dies without leaving a will, their assets will pass by what is called intestate succession, meaning their children and spouse will share in the estate. Many people just do not bother with drafting up a will, knowing that their relatives will share equally in the estate anyway. Of course, divorce changes everything. New Jersey's laws provide that a divorce revokes any disposition of property to the former spouse, as well as the appointment of the former spouse as a fiduciary. In other words, a divorce has the effect of completely disinheriting the spouse automatically. This does not include spouses who are separated or assets that pass outside the probate estate, such as life insurance. For some assets, like retirement benefits, you are not allowed to name someone who is not your spouse as the beneficiary without consent while you are married. Therefore, once you file for a grey divorce in NJ, it is time to consider how you want to divide up your estate in the event of your death, and you should start making plans to craft a will and change beneficiaries shortly after your divorce is finalized to clarify how your estate will pass.

By the same token, parties who have been together for decades do not feel right completely disinheriting their spouse upon divorce. In this event, it would be incumbent upon the decedent spouse to draft up a will to provide that, in spite of the divorce between the parties, the surviving spouse should be entitled to a share of the estate, if they so desire. This is more common in very large estates where the parties have multiple shared children and grandchildren.

If you have questions about getting a grey divorce in NJ, call The Law Offices of Peter Van Aulen at 201-845-7400 today, for a consultation.


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