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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. It appears the police and prosecutors are allowed to change the rules halfway through the game to suit themselves. I am surprised that the congress has not yet eliminated the right to a trial in cases involving any type of forensic evidence. That would suit their foolish law and order police state views. I say we eliminate the statute of limitations for crimes committed by members of congress and other government employees. Of course they would never do that. They are all corrupt cowards!!!

  2. Poor Judge Brown probably thought that by slavishly serving the godz of the age her violations of 18th century concepts like due process and the rule of law would be overlooked. Mayhaps she was merely a Judge ahead of her time?

  3. in a lawyer discipline case Judge Brown, now removed, was presiding over a hearing about a lawyer accused of the supposedly heinous ethical violation of saying the words "Illegal immigrant." (IN re Barker) http://www.in.gov/judiciary/files/order-discipline-2013-55S00-1008-DI-429.pdf .... I wonder if when we compare the egregious violations of due process by Judge Brown, to her chiding of another lawyer for politically incorrectness, if there are any conclusions to be drawn about what kind of person, what kind of judge, what kind of apparatchik, is busy implementing the agenda of political correctness and making off-limits legit advocacy about an adverse party in a suit whose illegal alien status is relevant? I am just asking the question, the reader can make own conclsuion. Oh wait-- did I use the wrong adjective-- let me rephrase that, um undocumented alien?

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  5. You can put your photos anywhere you like... When someone steals it they know it doesn't belong to them. And, a man getting a divorce is automatically not a nice guy...? That's ridiculous. Since when is need of money a conflict of interest? That would mean that no one should have a job unless they are already financially solvent without a job... A photographer is also under no obligation to use a watermark (again, people know when a photo doesn't belong to them) or provide contact information. Hey, he didn't make it easy for me to pay him so I'll just take it! Well heck, might as well walk out of the grocery store with a cart full of food because the lines are too long and you don't find that convenient. "Only in Indiana." Oh, now you're passing judgement on an entire state... What state do you live in? I need to characterize everyone in your state as ignorant and opinionated. And the final bit of ignorance; assuming a photo anyone would want is lucky and then how much does your camera have to cost to make it a good photo, in your obviously relevant opinion?

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