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Reed: ‘Gray divorce revolution’ alters traditional estate planning

July 16, 2014
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By James A. Reed

Americans over the age of 50 are getting divorced at a record rate – doubling since 1990. Sociologists have coined the term “gray divorces” to describe this phenomenon. Some estimate that by the year 2030 there will be 800,000 gray divorces annually. These statistics are so significant that social commentators are calling this a “gray divorce revolution.”

In a gray divorce, each spouse often leaves the marriage with a grouping of assets unlike members of any other age group getting divorced. The family situation has changed dramatically – children are now adults and through college, many married and with children. The “gray divorcees” are in the midst of a completely changed or changing lifestyle. At this age there is less time to make any kind of financial rebound because the remaining time for significant earnings is short. The financial planning previously done for the joint husband and wife retirement is out the window or under serious renovation. Estate planning for “us” is now estate planning for “me.”

Estate planning for “gray divorcees” presents unique challenges for their legal and financial planning professionals. Hopefully, your client has involved a skilled financial advisor during the divorce. That advisor can provide invaluable counsel when figuring out what assets are better to take in the property settlement. They also can work with the client to develop a realistic budget for upcoming living expenses. I have found that in these divorces, regardless of the amount of assets, it often still makes good sense (financially and emotionally) to continue employment or obtain employment for the next several years. The longer a client can delay relying heavily on their assets to pay their bills, the better.

Divorce, especially gray divorce, forces a client to answer big questions like, “What in my life is most important to me?” or “What values do I hold most dearly?” or “What do I want my life to be and be about?” Many couples at this age have already been active in philanthropic efforts. The couple may have already established a family foundation or charitable fund. Does the client still value these specific efforts or move in a different direction individually? The estate planning objectives need to align with the answers to those questions and many others. Exploration and assessment are big parts of the client’s overall planning experience.

I advise clients to consider interim estate planning to cover the time before the divorce is final. At the time of the divorce, the estate planning with the gray divorcee basically starts from scratch. If not done already, the client needs an immediate inventory and review of all existing planning documents, especially any powers of attorney granting the former spouse legal authority or health care decision-making. Should the client’s child or children be placed in the roles of personal representative, contingent trustee of the client’s revocable trust, health care decision-maker, and attorney-in-fact possessing full legal authority? Is that child prepared and capable of acting in these critical roles? Does that child fully understand the parent’s wishes and honor the parent’s plans? The considerations involved in this decision-making process often provide a completely new parent/child relationship dynamic.

When married, spouses typically planned on each being available to care for or manage the care of the other if needed. After a divorce, planning for one’s own care is critical. What is the plan for temporary care in case of an accident or sudden illness? Do the legal documents and established plan allow for someone to manage the client’s affairs while incapacitated? Is long-term care insurance a viable option and a wise purchase?

Life insurance is something that is often overlooked in post-divorce planning. If your client has little or no life insurance coming out of the divorce, you should consider how and if life insurance needs to be a part of the plan. I often see so-called “second to die” life insurance policies in gray divorces. Typically, the “second to die” policy does not pay when the first spouse dies, and only pays upon the death of the second. Once divorced, the former spouses may no longer have a common interest in where the proceeds should go. Or, there may be a trustee of an irrevocable trust holding title to the policy with the proceeds funding the trust. Whatever the circumstances, a careful review of life insurance is part of the planning process.

It is not unusual for gray divorcees to find themselves involved in a subsequent committed relationship. A premarital agreement will allow your client to protect assets and define financial responsibilities in the event of a divorce. Also, a premarital agreement will allow your client to control the ultimate disposition of his or her assets at death. For those looking at a non-marital living together relationship, a cohabitation or “no nup” agreement may be advisable. Both agreements can avoid unintended consequences which may be imposed by law without a clear contract.

Estate planning with the gray divorcee client requires a thoughtful and deliberate approach to the unique circumstances these clients present. It is a time of significant life transition and exploration. Even once a plan is in place, these clients require more frequent review and possible plan adjustments than do your more traditional planning clients.•

__________

James A. Reed–jreed@bgdlegal.com–is a partner at Bingham Greenebaum Doll LLP. Reed focuses his practice on the legal aspects of relationship transitions of all types. Reed is a fellow of the American Academy of Matrimonial Lawyers. The opinions expressed are those of the author.

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  1. Indianapolis employers harassment among minorities AFRICAN Americans needs to be discussed the metro Indianapolis area is horrible when it comes to harassing African American employees especially in the local healthcare facilities. Racially profiling in the workplace is an major issue. Please make it better because I'm many civil rights leaders would come here and justify that Indiana is a state the WORKS only applies to Caucasian Americans especially in Hamilton county. Indiana targets African Americans in the workplace so when governor pence is trying to convince people to vote for him this would be awesome publicity for the Presidency Elections.

  2. Wishing Mary Willis only God's best, and superhuman strength, as she attempts to right a ship that too often strays far off course. May she never suffer this personal affect, as some do who attempt to change a broken system: https://www.youtube.com/watch?v=QojajMsd2nE

  3. Indiana's seatbelt law is not punishable as a crime. It is an infraction. Apparently some of our Circuit judges have deemed settled law inapplicable if it fails to fit their litmus test of political correctness. Extrapolating to redefine terms of behavior in a violation of immigration law to the entire body of criminal law leaves a smorgasbord of opportunity for judicial mischief.

  4. I wonder if $10 diversions for failure to wear seat belts are considered moral turpitude in federal immigration law like they are under Indiana law? Anyone know?

  5. What a fine article, thank you! I can testify firsthand and by detailed legal reports (at end of this note) as to the dire consequences of rejecting this truth from the fine article above: "The inclusion and expansion of this right [to jury] in Indiana’s Constitution is a clear reflection of our state’s intention to emphasize the importance of every Hoosier’s right to make their case in front of a jury of their peers." Over $20? Every Hoosier? Well then how about when your very vocation is on the line? How about instead of a jury of peers, one faces a bevy of political appointees, mini-czars, who care less about due process of the law than the real czars did? Instead of trial by jury, trial by ideological ordeal run by Orwellian agents? Well that is built into more than a few administrative law committees of the Ind S.Ct., and it is now being weaponized, as is revealed in articles posted at this ezine, to root out post moderns heresies like refusal to stand and pledge allegiance to all things politically correct. My career was burned at the stake for not so saluting, but I think I was just one of the early logs. Due, at least in part, to the removal of the jury from bar admission and bar discipline cases, many more fires will soon be lit. Perhaps one awaits you, dear heretic? Oh, at that Ind. article 12 plank about a remedy at law for every damage done ... ah, well, the founders evidently meant only for those damages done not by the government itself, rabid statists that they were. (Yes, that was sarcasm.) My written reports available here: Denied petition for cert (this time around): http://tinyurl.com/zdmawmw Denied petition for cert (from the 2009 denial and five year banishment): http://tinyurl.com/zcypybh Related, not written by me: Amicus brief: http://tinyurl.com/hvh7qgp

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