Beth D. Lynch
The adage says that "some things get better with age," but apparently marriage is not always one of them. Unfortunately, the divorce rate for older couples is increasing. A recent study by Susan L. Brown and I-Fen Lin, sociologists at Bowling Green State University, found that approximately one in four divorces in 2010 were couples age 50 or older. Although no clear explanation is available as to why rates are increasing, one thing is clear: the longer the marriage, the more assets can accumulate. This accumulation of assets creates complex situations if a couple separates. The important question is what one should do to prepare. The answer is easier said than done because of the emotional investment that is involved.
The first thing you will need to do is be aware of all the emotions you will undergo and manage them. The good news is that you are not alone in this process. Not only are support groups available, but don't forget to reach out to close friends and family to get you through. Dealing with divorce is difficult, with so many emotions to deal with on top of trying to determine where you will stand financially when it's over. Every situation is unique. Men and woman deal with divorce differently, sometimes in contrasting styles. Marriages may involve young children, older children or no children. The spouses may both be employed, one employed or even in retirement. Regardless of the situation, you must be prepared to deal with the divorce on many emotional levels. These emotions can evolve rapidly over time, so having someone to listen and assist you through this journey is essential.
The next step is putting together a plan to take control of the things you can by preparing financially. This is where your family law attorney and a financial adviser become helpful team members. Discussed below are things that need to be compiled or considered prior to meeting with your attorney. Many of these items can be gathered by your financial adviser. If you don't have one who already knows your situation, you may want to look for someone who is well versed in financial planning for divorced individuals. The following tips should help your attorney gather information about your specific situation and help you to be organized so that you can feel in control during the process.
Organize Financial Documents
Organize all of your financial documents. This will involve making a list of all bank accounts, brokerage accounts, credit cards, loans (car, home, line of credit), insurance policies, valuables such as jewelry, artwork or collectibles, etc. This list should include account numbers, ownership (individual, joint, IRA) and account values. It doesn't hurt to have a copy of all these documents, too. Keep these documents in separately marked file folders or a binder. Document everything. Make copies of your Social Security statement and your spouse's Social Security statement. Also, make sure you have copies of past tax returns. This can be helpful in determining accounts that you may not have known existed. These can be brokerage accounts or limited partnerships — items with income and/or interest. Don't forget that safe deposit box or the items it contains.
Dealing with Cash Accounts
This step should not be done without having a conversation with your soon-to-be-ex-spouse. You will both need cash for living expenses. Dividing the bank accounts into two accounts will make sure that one spouse is not spending cash down and leaving nothing for the other to pay necessary expenses. Joint investment accounts should not be separated at this stage; we will address investment accounts later.
Credit Cards
Close all joint credit cards, but make sure you have a major credit card in your name. Again, prior to closing your joint credit cards, have a conversation with your spouse. This will accomplish a couple of things: if there is a balance on the card, the amount owed by each party can be determined based on date of separation. It will also protect you from your spouse accumulating a large amount of debt shortly after separating.
Life Insurance
When looking at your life insurance policies, it's important to note the owner of the policy, because it could be a trust and not an individual. If it is owned by a trust, make sure you give a copy of the trust document to your attorney. The language in the trust could have a clause concerning claims of the death benefit in the case of a divorce. Furthermore, document the type of insurance (term, whole life, universal life, etc.). Determine whom the insurance covers (the insured), who the beneficiaries are, how much the death benefit is, whether there is any cash value, and who will pay the premium during the divorce process. All of this information is important during the divorce process in determining if ownership or beneficiaries should be changed.
Once the divorce is granted and depending on the situation, you may want to change the beneficiary if your spouse is named. However, if young children are involved, this policy may need to be kept in place to ensure future child support. Life insurance is an area where state laws and federal laws are tricky. You will need to make sure that your intentions on the beneficiaries are known and clearly documented in the divorce documents. This is also important for the designations on annuities, IRAs and any other contracts that have beneficiaries listed. Because state law differs in rulings regarding who the recipient will be at the owner's death, it is important that the attorney address this situation and that you follow up on any changes that need your attention. Distributions to beneficiaries have been challenged in court. Unfortunately, the court may not find in favor of your intentions unless they are well documented.
All of the above items, along with many others, will be part of the discovery process. Having these items put together prior to meeting with the attorney will save time, money and get the process started quicker. Additional items, including the value of your home(s), outstanding debt, cars and boats, and investment accounts including company-sponsored plans such as 401k, 403b and pension plans, should also be documented and disclosed. Make copies of anything that is considered marital property.
You are now ready to meet with your attorney. Talk to your attorney about your situation and ask whether there are any other required documents. Many attorneys have checklists that you can use to gather all of your personal property information — ask them for one. They may also ask that you put together a budget to see if you can afford to stay in the marital home and to assess your current expenses. In addition, ask them for a timeline of how or when things will be completed and when documents will be filed. This is helpful in navigating through the divorce process. Keeping a calendar of appointments and documenting all meetings or conversations with your soon-to-be-ex-spouse and your attorney is highly recommended. Put together a to-do list to make sure that you get all the documents to your attorney in a timely fashion and that nothing is forgotten. This will help things move along smoothly and quickly and keep you in control.
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