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Three Divorce Mistakes To Avoid For Couples Over 50

Although divorce is common for many New Jersey couples, older couples may be at a greater risk for divorce according to a recent survey from the National Center for Family & Marriage Research. The survey indicates that the national divorce rate for couples over 50 has doubled despite a slight decline in the overall divorce rate.

Approximately 300,000 couples over the age of 50 divorced in 2008, The Wall Street Journal reports. One of the Marriage Research Center’s analysts believes that the high divorce rate is attributable to the fact that many people over 50 are married for the second or third time, and these marriages are less likely to last.

The financial stakes are higher for couples who divorce over 50 because there is less time to rebound before retirement. There are three main mistakes to avoid according to Wall Street Journal’s Smart Money series.

Mistake 1: Ignoring retirement fund taxes

Many couples who split assets fail to consider that a retirement account is subject to tax. When the money is taxed upon withdrawal, the retirement account many be only worth 65% of its balance and many couples make the mistake of dividing the marital assets based on the account’s pre-tax balance.

Mistake 2: Failing to properly value alimony and Social Security

Many couples overvalue the alimony. The monthly alimony payments will end when the paying spouse dies and may leave the surviving spouse without a necessary income stream. Some couples avoid this issue by taking out a life insurance on the paying spouse which is owned by the spouse receiving payments.

Couples also undervalue Social Security payments. The Wall Street Journal reports that for couples who are married 10 years, one spouse may be entitled to the benefits of the other spouse at age 62 if that spouse remains unmarried. Therefore the lower earning spouse may want to claim the benefits of the higher earning spouse in settlement negotiations.

Mistake 3: Forgetting about the children

A trust may be a helpful tool for families with adult children. A lifetime asset protection trust can ensure that the couple’s children will inherit assets, and not the future spouse of either party. For couples with children under 18, Wall Street Journal reports that it is important to have a guardian of the children and to consider having a separate guardian for the money.

Source: Wall Street Journal, “Divorce Over 50: 3 Mistakes to Avoid,” Catey Hill, 3/23/11