Divorce in mid-life: Fresh starts, new financial challenges for women

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While divorce isn't easy for anyone, it can often come with special hurdles for women. Consider these key points as you make decisions about splitting your finances and moving on.
Divorce is always an emotional time, filled with uncertainty: What will it mean for you? For your family? For your financial situation? And that's even truer for long-married couples. But, increasingly, couples over 50 are taking the step to separate their lives — and finances — if they're no longer happy together.
In fact, people over 50 are now twice as likely to part ways as they were in 1990, according to research from the Center for Family & Demographic Research at Bowling Green State University.Footnote 1 And according to a Stanford University study, women actually initiate 69% of all marital breakups.Footnote 2
A really critical first step is to get down to financial brass tacks — take a good hard look at everything you own and everything you owe.
— Merrill Financial Advisor Megan Stirrat
The financial implications of divorce can be a sticking point — especially for women. According to one report from the U.S. Government Accountability Office,Footnote 3 women's household income fell by 41% following a divorce or separation after age 50, while men's household income dropped by only 23%. With women living an estimated five years longer than men, that dip in income can have serious consequences — which makes the financial decisions women make as they file for divorce all the more important.
"A really critical first step is to get down to financial brass tacks," says Merrill Financial Advisor Megan Stirrat, who has advised many women clients as they've dealt with the financial aspects of divorce. "Do an assets and debt inventory — take a good hard look at everything you own and everything you owe." It's only from there that you can work out a plan for distributing your assets fairly.
Splitting your finances during a divorce is never easy. These steps can help smooth the process.
Below, Stirrat points out four financial areas that every divorcing woman should consider carefully:

4 key things to consider when divorcing

Your investments and other property. The laws that govern how property will be divided in a divorce vary from state to state, so you'll be guided to some extent by local laws and customary practices. "That's why it makes a difference to have a lawyer who really knows local law," says Stirrat. For instance, there are nine states that are so-called community property states, in which property acquired during the marriage is generally divided 50/50. Other states tend to call for "equitable" division of joint assets, which just means that they're split in a way that's deemed to be fair, not equal. On top of that, some states are "no fault" states, in which the circumstances of the divorce play no role in the division of assets, while other states take such factors into consideration.
If your financial assets are primarily stocks, bonds and cash, divvying them up is often straightforward once you've agreed on what constitutes an "equitable" split, Stirrat says. The complications come with assets such as stock options, income-producing real estate, a vacation home, art or collectibles. There might be further complications if one of you owns a business: Agreeing on value for the business as well as how much, if any, either party might be entitled to can be difficult.
"The typical advice for all of these kinds of assets is not to retain joint ownership," says Stirrat. It's important that you get independent, outside valuations, she adds. This not only reduces the likelihood of conflict, but helps ensure that you'll receive fair value (or pay fair value) in the event of a buy-out.
Your house. It may be the place where you raised your children and now call home, but it's also an asset. Try to put your emotions aside if you can. As Stirrat observes, "One of the biggest mistakes my divorcing clients make is to try and keep the marital home when they can't afford it. If you decide to put your home on the market, have it appraised right away so you can agree on a price." This is doubly true if one of you is going to buy the other out — you'll need to formally agree on a fair buyout price. If the divorce is amicable, you'll likely need just one appraisal. If not, each partner might want to get separate appraisals, which could then be averaged.
One of the biggest mistakes women make is to try and keep the marital home when they can't afford it. Have it appraised right away so you can agree on a price.
— Merrill Financial Advisor Megan Stirrat
Your retirement assets. It's always a good idea to include your accountant when you speak with your divorce lawyer about handling these assets. Transferring one person's retirement account, or a portion of it, to another requires special care to make sure there aren't tax implications. Also bear in mind that any private sector retirement plan that's covered by the Employee Retirement Income Security Act (ERISA), such as a 401(k) or a pension, will require a court-approved division of those assets through something called a Qualified Domestic Relations Order (QDRO). Your employer will also have to approve any QDRO.
"Getting the required language and approvals on a QDRO takes time, and it can be costly," Stirrat says. "So be sure to spell out how that cost will be divvied up ahead of time."
Social Security is another consideration. If you've been married for 10 years or more, you're entitled to 50% of your spouse's benefits or 100% of your own, whichever is greater. Says Stirrat, "If the marriage has lasted for nine-and-a-half years, it may be worth sticking things out for the additional six months." Note that claiming Social Security on your spouse's work record has no effect on your spouse's benefits.
Your monthly income. You may have your own income at the time of divorce — and might earn more than your spouse — but many women are in a very different position. They may have left their careers to have children, and have a lower income than their spouse because of their years out of the workforce. Working closely with your attorney and accountant, you should try to calculate how much income you'll require going forward, so you can ask for and hopefully receive the spousal support you need.
"Divorce can be an emotionally and financially difficult time," says Stirrat. "But you can come out the other side feeling stronger and less worried, with greater hope, stability, and freedom."

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Footnote 1 "The Gray Divorce Revolution," Center for Family & Demographic Research at Bowling Green State University, 2017

Footnote 2 "Who Wants the Breakup? Gender and Breakup in Heterosexual Couples," Michael J. Rosenfeld, Department of Sociology, Stanford University, 2017

Footnote 3 United States Government Accountability Office "The Nation's Retirement System," 2017

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