For Baby Boomer women, a late-life (or “gray divorce”) can take a significant financial toll on their retirement plans.
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According to an Allianz Life study, more than six in 10 (64%) of divorced respondents said their split created a financial crisis for them, and nearly an equal amount (59%) noted that losing their spouse/significant other due to divorce was a real “wake-up call” for them from a financial standpoint.
“It’s clear that no matter how confident women feel about their current financial situation and ability to manage money, divorce can create turmoil that has lasting effects,” said Allianz Life Senior Director of Consumer Insights Deb Repya. “It’s important that women play an active role in every aspect of their family’s financial planning, so they are better prepared for whatever challenges the future may bring.”
Mary Gurganus, founder and managing partner at Triangle Divorce Lawyers, discussed with Fox Business what you need to know to about the economics of divorce.
Boomer: What advice would you give women on how to prepare financially for a divorce?
Gurganus: Women over the age of 50 are the most influential, healthiest, wealthiest and most educated generation in history. There are three things a woman needs when facing a life changing event such as divorce.
First, establish a team of professionals to provide insight and opinions. An attorney explains her legal rights and responsibilities and identifies necessary documents and other information. An attorney designs a case plan to address safety concerns, child custody options, spousal and child support estimates, and property estimates. A counselor or therapist provides a healthy outlet to identify strategies to co-parent or to cope with emotions. A variety of other professionals such as a financial planner, accountant, realtor, insurance agent and mortgage broker move the client along in separating assets and establishing new accounts. A woman can utilize this team to work for her interests during and after a divorce.
Second, if there are children still at home, negotiating a child custody agreement before moving out may stop a contentious and expensive custody battle.
Finally, documents! Identifying the property of both spouses, including retirement, stock options and bank accounts, is essential to divide the assets and debts fairly. In order to prepare financially for a divorce, locating all valuable assets, titled property and debts is paramount. Once all property is identified and valued, the most beneficial division of property can be ascertained and used in negotiations and settlement, or subsequently in Court if necessary.
It is equally important to identify the monthly financial needs to determine alimony needs. Both spouses’ financial needs are taken into account and thus the other spouse’s expenses are also examined for accuracy. The historical expenditures also helps a woman determine whether she wants to remain in a family home or buy or rent a new place.
Boomer: How much does a divorce typically cost for Baby Boomer women?
Gurganus: For baby boomer women, the cost of the divorce varies greatly from a few thousand dollars to a six figure legal bill. In my experience, the more contentious the parties are about resolving their issues, the greater the legal fees. Typically, it is more expensive to pursue litigation than negotiate a separation agreement. However, it takes two reasonable people to sign a separation agreement and that may not be an option if emotions are high or assets are not disclosed. To minimize legal fees, the parties should, after understanding their legal rights, try to settle as many issues as they can together.
Boomer: What are some of the reasons given by women seeking a divorce after many years of being married?
Gurganus: Women who seek a divorce after a long marriage tell me several reasons they choose to divorce. A woman may have stayed in a marriage until the children graduated high school. Other times, it is a safety concern due to the other spouse drinking excessively or refusing treatment for a mental illness.
Sometimes there are safety issues that persisted through the marriage or started later, such as verbal or physical abuse. In some cases, one of the spouses has an affair and refuses to end that relationship.
Boomer: What are some of the biggest mistakes you have seen women make regarding divorce? What is your advice on ways to avoid them?
Gurganus: It is vital to obtain legal advice, even if representing herself. An experienced divorce lawyer will explain the process and make valuable suggestions to guide an unrepresented party, and is the lifeline if representing their client. Have an attorney review any documents before signing them. Also, it is essential to get financial documents as soon as a divorce becomes a possibility. Closely review the documents to identify and value all of the assets she may be entitled to. In addition, know her monthly financial needs and have access to enough money to survive until she can be heard in court.