The 'Splitting' Headaches of Late-Life Divorce

The 'Splitting' Headaches of Late-Life Divorce
Arnold Schwarzenegger and Maria Shriver announced their separation in May after 25 years together. Tipper and Al Gore separated last year after being married for four decades.

These long-wedded political couples are far from alone. A U.S. Census report issued earlier this year found that, over time, fewer first-time-married couples are making it to their 25th, 30th and 35th wedding anniversaries—even as life expectancies have increased.

The data don't indicate how old the couples were when they broke up, says Bradford Wilcox, director of the National Marriage Project at the University of Virginia. But some divorce attorneys and financial planners say they are seeing a growing number of long-married couples call it quits.

"As years go by and they get close to retirement age, where they have to be near one another more, one of them realizes they don't want to live the rest of their life in this manner," says Lynn Maier, a divorce lawyer and partner at Kurzman Eisenberg Corbin & Lever in White Plains, N.Y. She recently drew up divorce papers for a couple who were married 42 years.

A long-married couple that has done well financially must figure out how to divide investments, pensions and other retirement savings, vacation homes and businesses started by one spouse during the marriage. They must contend with a crazy quilt of regulations—some federal, some state and some set out by retirement plans themselves.

"Pulling apart all the fine threads of this tapestry we've created is very tedious," says Jeanne Horowitz, a 60-year-old voice teacher in New York who was married for 35 years before she and her husband, a doctor, parted ways last year.

But dividing a nest egg in a way that allows both spouses to retire without worry is crucial when there is little work time left to make up any shortfall, says Ms. Horowitz's financial adviser, Jeffrey Landers, president of Bedrock Divorce Advisors in New York.

Many of his clients are in their 50s and are getting divorced after three decades or more together, Mr. Landers says: "What I'm going to tell a woman who's 58 years old who's been out of the work force for 30 years is going to be very different from what I tell a woman in her 30s."

For older women negotiating a financial settlement, "that money has to last the rest of their lives," he says. "Even if they are employed, there's usually a huge disparity in what they're making."

Splitting up assets like brokerage and bank accounts and insurance policies is relatively straightforward. But some of the largest family assets can be much trickier. Among them:

The house. Large family homes have become an albatross for many couples going through divorce after long marriages, Ms. Maier says.

It used to be easy, when the children were grown, for a couple to sell the house. But in the current market, a house could remain for sale for more than a year, causing one more point to negotiate: Is one spouse willing to take the house itself in the settlement, or share in the ongoing expenses to maintain it, with the hope that the market will turn around in a few years?

The retirement plan. A couple's biggest asset, aside from their house, is often the retirement plan. Dividing it fairly could mean the difference for a nonworking spouse between a secure retirement and a hand-to-mouth existence.

Pensions, 401(k) accounts and individual retirement accounts are typically titled in one spouse's name, but they are still considered marital property if they were earned or acquired during the marriage. In the 41 "equitable distribution" states, spouses have the legal right to claim a share. In the remaining "community property" states, both spouses are considered equal owners.

To divide such accounts, you generally have to get a court-issued "qualified domestic relations order," or QDRO, which spells out what each partner gets. Be sure the QDRO addresses the specific retirement plan in question, because each plan has its own rules, says Wendy Foster, senior vice president of Fidelity Investments' defined-benefit unit.

In some cases, a judge approves a QDRO but it doesn't meet a retirement plan's qualifications, so the plan administrator must send the couple back to court to fix it. "It can be very expensive to go back and forth," Ms. Foster says. To avoid such issues, Fidelity works with its plans to provide model QDROs for participants to use, she says.

It also is important to distinguish between the two types of plans: "Qualified" plans, including 401(k)s and traditional pensions, fall under federal law and can be divided using a QDRO. But "nonqualified" plans that are typically awarded to executives—along with stock options, restricted stock and deferred compensation—aren't subject to the same rules and may not be able to be divided using a QDRO. You need to make sure those benefits are addressed separately in a settlement, says Emily Widmann McBurney, a lawyer with Davis, Matthews & Quigley in Atlanta who specializes in QDRO law.

People negotiating divorce settlements should consider working with an attorney who has extensive QDRO experience, or who hires a specialist—and be wary of attorneys who play down how tricky QDROs are, Mr. Landers says.

The family business. Mid- to late-life divorce can cripple a business started during the marriage and owned by one spouse, because the other spouse is generally entitled to a share, Mr. Landers says. Without careful planning, the business might have to be sold to comply with those terms.

Ms. Maier recommends that couples with a small business—especially those with children—enter into a "post-nuptial" agreement that spells out what happens to the business in the event of death and divorce. Such agreements, which are recognized in most states, are increasingly being used in estate planning, particularly for people in second marriages.



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