Five Significant Financial Risks of Gray Divorce

By Duncan E. White, Owner
Inkpointe Divorce Solutions, LLC

So, your spouse is leaving after all these years? Such is the reality of a gray divorce. It can be emotionally and financially draining at any stage of life, but it can be especially difficult for retirees. A divorce among retirees can be particularly complicated due to the unique financial issues that arise.

Here are some of the financial challenges that come with divorce among retirees:

Retirement Accounts and Pension Benefits

One of the biggest issues that come up in a divorce among retirees is dividing retirement accounts and pension benefits. The division of these assets is governed by federal law, specifically the Employee Retirement Income Security Act (ERISA). This means that it is important to work with a financial professional who is familiar with ERISA and can help you navigate the complex rules surrounding the division of these assets. Be sure to understand what a pension is worth by getting it valued properly. This one of the biggest mistakes I see during gray divorce situations.

Social Security Benefits

Social Security benefits can be a source of contention in a divorce, especially if one spouse was the primary earner. In most cases, the spouse who was the primary earner will be entitled to a larger Social Security benefit, but the other spouse may be entitled to a spousal benefit. The rules governing Social Security benefits can be extremely complicated. As a result, it is imperative you get the proper help to understand what options you have available during the negotiation phase.

Healthcare

Another issue that often arises in a divorce among retirees is healthcare. If one spouse was covered under the other spouse’s health insurance plan, they may lose their coverage after the divorce. This can be especially concerning for retirees who may have health issues that require ongoing medical care. It is important to explore all options for healthcare coverage and work with a qualified professional to find a solution that works for you. You’ll have access to COBRA, but it is expensive and only lasts for 36 months. You’ll need a plan to figure out your future coverage.

Real Estate

Real estate is often a major asset in a divorce, but it can be particularly complicated for retirees who may have downsized or moved to a new location. It is important to work with a real estate professional who can help you navigate the local market and find a solution that works for you. I suggest seeking the help of a Certified Divorce Lending Professional (CDLP®) if you are considering a mortgage in your own name. They bring invaluable expertise to the table when trying to navigate the mortgage process!

Tax Implications

Divorce can also have significant tax implications, especially for retirees who may be relying on their retirement savings for income. It is important to understand the tax implications of your divorce settlement. A qualified financial advisor who has a history of working with gray divorce can help you plan for the future.

The divorce process can be difficult at any stage of life, but it can be particularly complicated for retirees. It is important to work with a qualified financial professional who is familiar with the unique financial issues that come with divorce among retirees. Seek the advice of a Certified Divorce Financial Analyst (CDFA®) for solid guidance during this tricky time of life. With the right support, you can navigate this challenging time and come out on the other side with a secure financial future.

Afterall, it’s your future. Find quality professionals that can help you take control of it!

By Duncan E. White, Owner
Inkpointe Divorce Solutions, LLC

Cryptocurrency has gained significant popularity over the years, and its value has continued to rise, making it an increasingly important asset in divorce cases. Therefore, it is important for divorce attorneys to ask their clients about cryptocurrency during the discovery process.

Cryptocurrency is a digital or virtual currency that is secured by cryptography, making it difficult to counterfeit or double-spend. It operates independently of a central bank and can be transferred directly between individuals. This means that it is easy to hide, making it a prime target for individuals looking to conceal assets during divorce proceedings.

Divorce attorneys should always ask their clients about cryptocurrency because it may be considered a marital asset and is subject to division during divorce proceedings. It is also important to note that cryptocurrency transactions can be difficult to trace, making it a complex and challenging process to identify, value, and divide.

By adding questions about cryptocurrency to the discovery process, attorneys can ensure that all assets are identified, valued, and distributed equitably. This can also help to prevent future legal disputes that may arise due to undisclosed assets or unanticipated tax liabilities.

In addition, divorce attorneys should consider working with a Certified Divorce Financial Analyst (CDFA®) who can assist in identifying, valuing, and dividing cryptocurrency assets. A CDFA can also provide expertise on the tax implications of cryptocurrency transactions and help to ensure that both parties receive an equitable distribution of assets.

Cryptocurrency has become a significant asset in divorce cases, and divorce attorneys must be proactive in identifying and valuing these assets. Otherwise, they could face a malpractice lawsuit down the road. Including questions about cryptocurrency in the discovery process can help to ensure that all assets are identified and distributed fairly, ultimately leading to a smoother and more efficient divorce process for all parties involved.
Don’t let Cryptocurrency intimidate you! Make sure to do the research necessary to bring these assets to light before it’s too late!

In today’s litigious world, you’ll be glad you did!

By Duncan E. White, Owner
Inkpointe Divorce Solutions, LLC

I have some advice for you: Stop listening to everyone’s advice!
A divorce is hard enough without everyone telling you what to do. While it’s important to seek guidance and advice from professionals, it’s also important to be aware that not all advice is good advice. In fact, there are some people who may give you downright bad advice during your divorce process. Here are some of the usual suspects:

Friends and Family

While your friends and family may have good intentions, they may not have the legal or financial expertise to provide you with accurate and helpful advice. Their advice may be biased based on their own experiences or emotions, which may not be applicable to your situation. It’s probably not that helpful to hear (again) about Aunt Judy’s divorce that took place in 1973. Things change over time and the divorce world is no different!

Online Sources

There is a lot of information available online about divorce, but not all of it is reliable. Some websites may provide outdated or incorrect information, while others may be trying to sell you a product or service. And, no matter what you do, don’t take advice from social media! It’s a poisonous pit of unreliable information! Just avoid it altogether!

Unqualified Professionals

Be cautious of advice given by unqualified professionals such as therapists or life coaches who may not have the legal or financial expertise to provide you with accurate advice. While a financial advisor may say, “Sure, I work with people going through a divorce all the time!” do they actually have the credentials to back it up? If you are looking for solid financial advice around divorce-related topics, seek out a Certified Divorce Financial Analyst®. They have the training and expertise that can be helpful with your specific situation.

Your Spouse

Your spouse may not have your best interests in mind and may try to convince you to agree to terms that are not fair or equitable. You may not want to be taken for one last ride before you part ways.

So, what should you do if you receive bad divorce advice? First, always seek advice from qualified professionals such as divorce attorneys and financial advisors who specialize in divorce. Secondly, do your own research and verify any advice you receive before taking any action. Finally, trust your instincts and seek a second opinion if you are unsure about any advice you receive.

Remember, your divorce settlement can have long-term financial and legal implications. It’s important to make informed decisions based on accurate and reliable information.

You only get one shot to get it right.

By Duncan E. White, Owner
Inkpointe Divorce Solutions, LLC

A divorce, especially a contentious divorce, can often lead to intense conflict between spouses. One of the key challenges in a divorce is finding a way to communicate effectively with your spouse, without getting bogged down in the details of who gets what. Here are some tips on how to communicate effectively with your spouse during a divorce:

Focus on the big picture. Rather than getting caught up in the details of who gets what, try to focus on the big picture of what you both want to achieve from the divorce. This might include reaching a fair and equitable settlement, ensuring that your children’s needs are met, or finding a way to move on with your lives.

Listen actively. When communicating with your spouse, it is important to listen actively to what they are saying. This means taking the time to really understand their perspective while showing empathy and understanding for their feelings.

Use “I” statements. Rather than accusing your spouse or making demands, try to use “I” statements that focus on your own feelings and needs. For example, instead of saying “you’re being unfair”, try saying “I feel like this situation is unfair to me”.

Avoid blaming and criticism. Blaming and criticism can quickly escalate conflict and make it difficult to find common ground. Instead, focus on expressing your own feelings and needs, and try to find ways to work together towards a mutually beneficial solution.

Use a neutral third party. If you find it difficult to communicate effectively with your spouse, consider working with a neutral third party, such as a mediator or counselor. A neutral third party can help you to communicate more effectively and can provide a safe and supportive space for you to work through your differences. If the main concerns are related to financial issues, consider working with a Certified Divorce Financial Analyst® to get clarity on how you can come to a more equitable agreement.

Effective communication can help to minimize conflict and find a way forward. By focusing on the big picture, you can work together with your spouse and find a way to move on with your lives.

By Duncan E. White, Owner
Inkpointe Divorce Solutions, LLC

Divorce is a challenging and emotional process, and it can also have a significant impact on your financial stability. When couples go through a divorce, they must divide their assets and debts, and this can lead to some serious financial complications. Here are five financial outcomes you should try your best to avoid during a divorce:

Not understanding your financial situation.

One of the most significant financial mistakes you can make during a divorce is not having a clear understanding of your finances. Before you start the divorce process, it is crucial to gather all the financial documents that you will need, including bank statements, tax returns, and investment accounts. If you don’t have a clear understanding of your finances, you may end up with an unfair settlement.

Fighting over assets that aren’t worth it.

During a divorce, couples often fight over assets that aren’t worth the cost of the legal battle. For example, if you and your spouse are fighting over a piece of property that has a high mortgage and is underwater, it may not be worth the legal fees to keep it. It’s essential to consider the long-term cost of any legal battles and make sure you are fighting for assets that are worth the effort.

Failing to consider tax implications.

Many financial decisions during a divorce have tax implications. For example, if you receive alimony, it’s essential to understand how it will affect your taxes. Failing to consider the tax implications of your financial decisions can lead to some serious financial consequences.

Not considering the long-term financial impact.

When you’re going through the divorce process, it’s easy to focus on the short-term financial impact. However, it’s crucial to consider the long-term financial impact of any settlement. For example, if you’re fighting for the family home, you may not be considering the long-term cost of maintaining the property. It’s essential to consider the long-term financial impact of any decision you make.

Going into debt to finance the divorce.

Divorce can be expensive, and many people go into debt to finance the legal fees. However, going into debt to finance a divorce can have serious long-term financial consequences. It’s essential to have a plan in place to pay for the legal fees, whether it’s through savings or a loan. Going into debt to finance a divorce can lead to even more financial stress.

Going through a divorce is never easy, and it can have a significant impact on your financial stability. To avoid these financial mistakes, it’s essential to have a clear understanding of your finances. Consider working with a Certified Divorce Financial Analyst® to be sure you know what you are getting yourself into during the divorce settlement negotiations. By being proactive and informed, you can minimize the financial impact of a divorce and start rebuilding your financial stability.

By Duncan E. White, Owner
Inkpointe Divorce Solutions, LLC

“I’m keeping the house!”

Though well-intentioned, a person’s desire to keep the family home during the divorce process is an emotional decision that could lead to bigger problems later on.

Divorce feels like everything you thought you knew about your life and your future is suddenly flipped upside down and it can be a struggle to make sense of the pieces that remain. It’s common to want to stay in the house. I get that. You want to retain some form of normalcy during this chaotic time. While it seems like you are clinging to stability by staying in the family home, be aware that it may also be a very costly mistake.

Let’s take a look at the bigger picture to put things in perspective. A house is just a place to live. Nothing more. It does not provide any income to support your lifestyle. If you and your spouse lived there for quite some time, it’s possible there is a fairly large chunk of equity trapped in those walls. If you are awarded the home in the divorce, it could be the largest piece of the settlement.

You win, right? Well, maybe.

Let’s assume the home has a market value of $600,000 and there is $400,000 in equity. As marital property, half of that equity is yours, but the other half is your spouse’s. So, if you keep that home, a full $400,000 of your settlement will be tied up in that property. That same money could generate a sizable amount of income – even if it were invested conservatively. We also haven’t considered the costs of upkeep and maintenance that will increase the income necessary for you to make ends meet.

But wait! There’s more.

The potential tax impacts down the road could be staggering. If you were to sell the house while you are still married, the $400k capital gain would fall under the marriage exclusion of up to $500k ($250k each) and be tax-free. Once you transfer that home into your own name, and sell it with a gain of $400k, the personal exemption is only $250k. You could owe capital gains tax on $150k of gain or $30,000 (assuming your capital gains tax is 20%). Did your attorney remember to take that into consideration during your settlement negotiations? Yet one more reason I advocate for getting a financial professional involved on the front end.

Divorce is difficult but you also have an opportunity for a fresh start and getting off on the right financial footing is essential to your future. Though this time can be difficult, it does give you an opportunity to reset your financial future.

Take advantage of that opportunity!

To be certain that you understand all the ramifications of any property settlement you are considering, bring a Certified Divorce Financial Analyst (CDFA®) into the mix to shine the light onto some of these pivotal issues. You only have one chance to get your settlement right. Take the time to gather information and make sure you are doing the right thing.

It could be the best decision you ever made.