Getting divorced at 54 is very different from getting divorced at 34. You have fewer working years left to save money for the future, and your estate plan will need big changes. After a divorce, the money that once paid for one household now has to pay for two. Your retirement savings, the people you want to receive your assets, and your plans for care as you age all need a new look.
At Jimeno & Gray., our attorneys handle both divorce and estate planning. We help Maryland clients going through a gray divorce build an estate plan that fits their life after divorce. To discuss your future after a divorce later in life, contact our family law firm today.
Key Takeaways:
- If you get divorced after age 50, be sure to update all of your key estate planning documents. Check where your ex is mentioned and make changes accordingly.
- Consider your financial situation and retirement plans as the divorce is pending. This can give you a realistic look at what your future may involve so you can budget accordingly.
- Think about where you’ll live after getting divorced, what your taxes are going to look like, and what you’ll need to do about health insurance moving forward.
- Having a strong support network is crucial after getting divorced. Find people in your life who you love and trust who can be there for you for surprises, emergencies, and the good times ahead.
Why You Need to Update Your Estate Plan After a Gray Divorce
Your current estate plan was likely made for a married couple. It assumes your spouse will step in if you get sick or pass away. After a divorce, that is no longer true.
Key Concerns for People in a Gray Divorce
If you divorce after age 50, you have only a few years to save money again before you retire. At this stage of life, you may face issues like these:
- Less time to rebuild savings that were split in the divorce
- Adult children who have strong opinions about who should inherit
- Aging parents who are still named in your documents
- Health problems that can come up sooner than expected
- A retirement date you may need to push back
Dealing with these issues together, instead of one at a time, can help you avoid years of trying to catch up.
Estate Plan Documents to Update When You Get Divorced After 50
A younger person going through a divorce may only need a new will. If you are closer to retirement, you also need to plan for what happens if you get sick or can no longer make decisions for yourself.
Update these four documents as soon as possible:
- A Revocable Trust: If your estate goes through probate in the Orphans’ Court for Anne Arundel County, the court file is public. That means your ex can read it. A trust lets your property pass to your loved ones without a public court file. For a trust to work, you have to move your assets into it. This is called “funding” the trust.
- A Power of Attorney: This document names someone to handle your money and bills if you can’t. Think about naming someone younger than you, such as an adult child. A brother or sister close to your age may have their own health problems by the time you need them.
- An Advance Directive: This document says what medical care you want and who can make health decisions for you if you can’t. If your ex is named, you need to change it.
- A HIPAA Release: This form lets doctors and hospitals share your health information with the people you choose, such as your adult children.
Updating all four documents at the same time helps make sure they don’t say different things.
Before you change anything while your divorce is still going on, talk to your lawyer. Moving money into a trust or changing who gets your accounts during the case could cause problems with how the court divides your property.
Review Your Financial Situation
Start by figuring out how much money you will have to live on each month after the divorce is final. The rest of your plan depends on this number.
Alimony may be part of that number. Under Maryland Code, Family Law § 11-106, a judge in Anne Arundel County can sometimes order alimony with no end date. This can happen when age, illness, or disability keeps a spouse from being able to support themselves. It can also happen when, even after one spouse works toward supporting themselves, their standard of living would still be much lower than the other spouse’s.
Contact the Social Security Administration
You should also contact the Social Security Administration and ask if you can collect benefits based on your ex’s work record. This may be possible if your marriage lasted at least 10 years. Then ask your retirement plan’s administrator exactly how they will split your account.
Before your first settlement meeting, gather statements for every account, pension, and insurance policy in either of your names. If you can’t prove an asset, it will be hard to use it when you negotiate.
Think About Your Plans for Retirement
You may not be able to retire when you planned. Splitting a pension or a work retirement account can reduce the savings you built over many years, so many people have to work a few more years than they expected.
If you work for the government, there may be extra rules. Teachers, county workers, and state workers in the Maryland State Retirement and Pension System have their own rules for dividing retirement benefits.
Questions to Ask While Crunching the Numbers
Look at your latest statements and answer these questions:
- Can you still retire on the date you planned?
- What survivor option did you pick for a pension that is being divided?
- How does your work plan divide your account if you haven’t left your job yet?
- How much more can you add with catch-up contributions? (These let people 50 and older save extra money each year.)
Get the answers in writing from your plan administrator. Don’t rely on advice from a coworker who retired last year.
Check on Your Insurance Coverage
Health insurance is often the biggest problem in a gray divorce. If you lose coverage through your spouse’s job at 58, you still have years to go before you can get Medicare at 65.
You may be able to stay on your ex’s work health plan for a while after the divorce. This is called continuation coverage, but it only lasts for a set amount of time.
When you were married, you may have counted on your spouse to take care of you if you got sick. If you live alone, you need another plan. That could include long-term care insurance, savings set aside for care, or planning for Medicaid.
What to Consider Regarding Your Health Insurance
Well before your case ends, review each of these:
- Health insurance to cover you from your divorce date until you qualify for Medicare
- Life insurance that the divorce agreement says either of you must keep
- Disability insurance to replace your paycheck if you can’t work
- Long-term care insurance, which gets more expensive the longer you wait to buy it
- Home and car insurance policies that still list both of you
Your ex may have to keep a life insurance policy to back up support payments. That policy only protects you if the premiums get paid. Ask for your agreement to require your ex to show proof of coverage every year.
Go Over Your Housing Options
The family home is often the most emotional part of a gray divorce. Keeping the house may feel safe, but you might have to give up retirement money to do it.
Home prices in Anne Arundel County vary a lot from one area to the next. Compare each option below with the monthly budget you figured out earlier:
- Keeping the House: You would buy out your spouse’s share and stay in a familiar place. But much of your money would be tied up in the house, and you would pay for taxes, repairs, and insurance on your own.
- Selling the House and Splitting the Money: Selling gives each of you cash to use as you choose. Neither of you have to pay for upkeep or cover the mortgage alone.
- Renting for a Year First: Renting gives you time to see what your life looks like after the divorce while your finances settle.
- Buying a Smaller Home with a New Mortgage: A smaller, cheaper loan may make sense if your income can easily cover it. Lenders will look only at your income now, so getting preapproved before you negotiate can help you know what you can afford.
Write down the costs of each choice so you can make a decision based on real numbers.
Consider Your Future Taxes
Once you file taxes as a single person, you may pay more tax on the same amount of income. Maryland also charges a county income tax on top of the state tax.
Maryland offers a tax break on pension income for people 65 or older, or for people who are totally disabled or whose spouse is (Maryland Code, Tax-General § 10-209). This break only covers income from a work retirement plan, like a pension. It also gets smaller if you receive Social Security or Railroad Retirement benefits.
Individual retirement accounts (IRAs) don’t count for this tax break. If your divorce settlement rolls money from a work retirement plan into an IRA, you could lose a Maryland tax break you would otherwise get at 65. Talk about this with your lawyer before you sign your agreement.
The timing of your settlement can also affect your taxes. Deciding which spouse claims which deductions, and which year money changes hands, can save thousands of dollars without changing how your property is divided.
Draft a Budget That Makes Sense for You
Make your budget while your divorce is still going on. Use the settlement terms you are actually discussing.
Living alone often costs more than people expect. Bills like utilities and insurance don’t get much smaller just because fewer people live in your home.
How to Create a Budget That’s Practical After Your Gray Divorce
Look at your last three months of bank and credit card statements. Then figure out what each of these will cost you:
- Housing, including property taxes, insurance, and money saved for repairs
- Health insurance premiums, deductibles, and out-of-pocket costs
- Car costs that you now pay on your own
- Support you pay or receive, and the date it ends
- Money you set aside to help adult children or aging parents
- Emergency savings in case you lose your job or have a health problem
It helps to make two budgets. Base one on the settlement you expect and the other on the least amount of money you could live on. That way, you know your limits before you start negotiating.
Line Up People You Can Count On
After a long marriage ends, you need people who can help with everyday tasks as well as emotional support. The friend who drives you home after a medical procedure may also be someone you name in your estate plan.
Find People You Can Lean on in Different Situations
A divorce later in life can change your friendships, especially if many of them came through your marriage. Think about who could fill each of these roles:
- Someone you can call from the emergency room at night
- Someone nearby who has a spare key and your alarm code
- A neighbor or friend who would notice if something seemed wrong
- An adult child or sibling who knows about your finances
If you can’t think of someone for each role, try to fill those gaps now. The Anne Arundel County Department of Aging and Disabilities offers programs that help older residents connect with others and find support.
How a Lawyer Can Help You Plan for the Next Chapter of Life
A gray divorce involves both family law and estate planning. If you handle them separately, your divorce agreement and your estate plan may not work together. It helps to have a lawyer review both at the same time.
Our team helps people update both parts of their plan after a long marriage, from making the first list of your property to signing your new documents.
Come to Our Law Firm About Your Gray Divorce in Maryland
New beginnings and adventures are possible at any age. We’re here to help make sure you make the best of what’s to come. To discuss your situation with our skilled team of attorneys, contact our family law firm today.