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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. Yes diversity is so very important. With justice Rucker off ... the court is too white. Still too male. No Hispanic justice. No LGBT justice. And there are other checkboxes missing as well. This will not do. I say hold the seat until a physically handicapped Black Lesbian of Hispanic heritage and eastern religious creed with bipolar issues can be located. Perhaps an international search, with a preference for third world candidates, is indicated. A non English speaker would surely increase our diversity quotient!!!

  2. First, I want to thank Justice Rucker for his many years of public service, not just at the appellate court level for over 25 years, but also when he served the people of Lake County as a Deputy Prosecutor, City Attorney for Gary, IN, and in private practice in a smaller, highly diverse community with a history of serious economic challenges, ethnic tensions, and recently publicized but apparently long-standing environmental health risks to some of its poorest residents. Congratulations for having the dedication & courage to practice law in areas many in our state might have considered too dangerous or too poor at different points in time. It was also courageous to step into a prominent and highly visible position of public service & respect in the early 1990's, remaining in a position that left you open to state-wide public scrutiny (without any glitches) for over 25 years. Yes, Hoosiers of all backgrounds can take pride in your many years of public service. But people of color who watched your ascent to the highest levels of state government no doubt felt even more as you transcended some real & perhaps some perceived social, economic, academic and professional barriers. You were living proof that, with hard work, dedication & a spirit of public service, a person who shared their same skin tone or came from the same county they grew up in could achieve great success. At the same time, perhaps unknowingly, you helped fellow members of the judiciary, court staff, litigants and the public better understand that differences that are only skin-deep neither define nor limit a person's character, abilities or prospects in life. You also helped others appreciate that people of different races & backgrounds can live and work together peacefully & productively for the greater good of all. Those are truths that didn't have to be written down in court opinions. Anyone paying attention could see that truth lived out every day you devoted to public service. I believe you have been a "trailblazer" in Indiana's legal community and its judiciary. I also embrace your belief that society's needs can be better served when people in positions of governmental power reflect the many complexions of the population that they serve. Whether through greater understanding across the existing racial spectrum or through the removal of some real and some perceived color-based, hope-crushing barriers to life opportunities & success, movement toward a more reflective representation of the population being governed will lead to greater and uninterrupted respect for laws designed to protect all peoples' rights to life, liberty & the pursuit of happiness. Thanks again for a job well-done & for the inevitable positive impact your service has had - and will continue to have - on countless Hoosiers of all backgrounds & colors.

  3. Diversity is important, but with some limitations. For instance, diversity of experience is a great thing that can be very helpful in certain jobs or roles. Diversity of skin color is never important, ever, under any circumstance. To think that skin color changes one single thing about a person is patently racist and offensive. Likewise, diversity of values is useless. Some values are better than others. In the case of a supreme court justice, I actually think diversity is unimportant. The justices are not to impose their own beliefs on rulings, but need to apply the law to the facts in an objective manner.

  4. Have been seeing this wonderful physician for a few years and was one of his patients who told him about what we were being told at CVS. Multiple ones. This was a witch hunt and they shold be ashamed of how patients were treated. Most of all, CVS should be ashamed for what they put this physician through. So thankful he fought back. His office is no "pill mill'. He does drug testing multiple times a year and sees patients a minimum of four times a year.

  5. Brian W, I fear I have not been sufficiently entertaining to bring you back. Here is a real laugh track that just might do it. When one is grabbed by the scruff of his worldview and made to choose between his Confession and his profession ... it is a not a hard choice, given the Confession affects eternity. But then comes the hardship in this world. Imagine how often I hear taunts like yours ... "what, you could not even pass character and fitness after they let you sit and pass their bar exam ... dude, there must really be something wrong with you!" Even one of the Bishop's foremost courtiers said that, when explaining why the RCC refused to stand with me. You want entertaining? How about watching your personal economy crash while you have a wife and five kids to clothe and feed. And you can't because you cannot work, because those demanding you cast off your Confession to be allowed into "their" profession have all the control. And you know that they are wrong, dead wrong, and that even the professional code itself allows your Faithful stand, to wit: "A lawyer may refuse to comply with an obligation imposed by law upon a good faith belief that no valid obligation exists. The provisions of Rule 1.2(d) concerning a good faith challenge to the validity, scope, meaning or application of the law apply to challenges of legal regulation of the practice of law." YET YOU ARE A NONPERSON before the BLE, and will not be heard on your rights or their duties to the law -- you are under tyranny, not law. And so they win in this world, you lose, and you lose even your belief in the rule of law, and demoralization joins poverty, and very troubling thoughts impeaching self worth rush in to fill the void where your career once lived. Thoughts you did not think possible. You find yourself a failure ... in your profession, in your support of your family, in the mirror. And there is little to keep hope alive, because tyranny rules so firmly and none, not the church, not the NGO's, none truly give a damn. Not even a new court, who pay such lip service to justice and ancient role models. You want entertainment? Well if you are on the side of the courtiers running the system that has crushed me, as I suspect you are, then Orwell must be a real riot: "There will be no curiosity, no enjoyment of the process of life. All competing pleasures will be destroyed. But always — do not forget this, Winston — always there will be the intoxication of power, constantly increasing and constantly growing subtler. Always, at every moment, there will be the thrill of victory, the sensation of trampling on an enemy who is helpless. If you want a picture of the future, imagine a boot stamping on a human face — forever." I never thought they would win, I always thought that at the end of the day the rule of law would prevail. Yes, the rule of man's law. Instead power prevailed, so many rules broken by the system to break me. It took years, but, finally, the end that Dr Bowman predicted is upon me, the end that she advised the BLE to take to break me. Ironically, that is the one thing in her far left of center report that the BLE (after stamping, in red ink, on Jan 22) is uninterested in, as that the BLE and ADA office that used the federal statute as a sword now refuses to even dialogue on her dire prediction as to my fate. "C'est la vie" Entertaining enough for you, status quo defender?

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