Ilyssa Panitz freely admits she gave up the financial reins when she got married.
“I did not keep an eye on the money, even though I got married later in life,” says Panitz, 54, who lives in Westchester County, N.Y. “My former spouse worked in accounting and I was taking care of the kids, and I figured ‘This is great’.”
Then, after 13 years of marriage, says Panitz, who hosts the nationally syndicated radio show, “The Divorce Hour with Illyssa Panitz,” she told her husband she wanted to split up. And she realized her ignorance about their money situation “was my biggest mistake and biggest downfall. I had the rug pulled out from under me.”
Record Divorces Among Seniors
Between 1990 and 2017, the divorce rate doubled for older people. Now, one in four divorces are among people over 50.
There are a number of reasons for the increase in so-called gray divorces. Culturally, divorces, and later-in-life divorces, are more accepted than ever. People live longer — men’s average longevity in the U.S. is 73, women 79 years old — so new relationships and careers past 50 are more and more common. And it’s much easier to walk out of a marriage and home when white-collar jobs can be worked remotely from anywhere with an internet connection.
“People say, ‘I don’t want to live the rest of my life like this,,” says Sarah Jacobs, a family law and matrimonial lawyer Morristown, N.J. “‘I have time to make a change and still have quality of life and portability of my personal self and my work self. I can move to Florida where there’s no state income tax and still have the job that I had in New York on a New York salary.’”
Have a Handle on Your Finances
Understanding your money situation is the first big step in divorce proceedings. States typically require a financial affidavit or statement of net worth. In Illinois, for instance, both parties must fill out a financial affidavit and include tax returns, pay stubs, documents showing what’s owned and what’s owed and other records. This affidavit is the 11-page document that delves into the minutia of spending, including not just big-ticket items such as mortgages or rent and utilities, but also monthly clothing costs (including dry-cleaning) and children’s extra-curricular activities, down to the cost of their birthday parties.
The requirement to answer that statement of net worth made Panitz realize how much she didn’t know about her family’s finances. She could answer how much she and her husband were making but floundered over the specifics of their mortgage, how much the car leases were or the balance on their credit card.
The real surprise, however, was when she found out there was a home equity line of credit on the house that she wasn’t aware of — meaning there was no equity in their million-dollar plus house.
“My credit went from fabulous to I-think-the-janitors-swept-it-up,” says Panitz, whose divorce was finalized in December 2020. ”People, especially women, have to know they have to pay attention to their finances in their marriage whether there’s a divorce or not. Anything can happen.”
Women Take the Biggest Hits
Research shows people older than 50 who divorce have a decline in their standard of living, but it’s more drastic for women; their standard of living drops by 45% compared with men’s decline of 21%.
Older people seeking divorce are usually much more concerned about retirement accounts and pensions than younger divorcers. The processes of dividing IRAs, 401(k)s or pensions differ and can be complicated. It’s important to know about something called a qualified domestic relations order (QDRO), a judgment, decree or order that allows assets in a 401(k) or pension plan to be divided between parties without tax consequences or penalties.
IRAs are not covered by QDROs, but dividing them is usually easier. If the IRA was opened during the marriage, it’s considered a marital asset and will be divided like other assets. If it was opened before the marriage, the funds contributed during the marriage may be considered a marital asset.
Social Security also comes into play in older divorces; if you meet specific criteria, you can receive Social Security from an ex-spouse. To qualify, your marriage must have lasted at least 10 years; you must also be unmarried and at least 62 years old. The Social Security Administration lays out all the provisions on its website.
Lessons Learned
- Fully understand your finances including all investments, savings and debts. That can also include credit card points and frequent flier miles.
- Assemble a team: lawyers, financial planners, accountants. But remember, they’re not your friends or therapists. Look for psychological professionals or support groups to give you the emotional support you need.
- Don’t get fixated on holding onto your family house. Figure out the full costs of staying there including taxes and upkeep and if you will still be able to make it financially if your property value drops.
- Don’t forget about health insurance if you are divorcing before Medicare kicks in at age 65. Understand your options and the costs.
Justia Blogs: Credit Alina Tugend