How Your Ex Can Give You Financial Problems After Divorce
Divorce is tough. And what comes years after that can be tougher, especially when talking about your financial assets.
From a survey by TD Wealth, four in 10 estate planners and lawyers said that “gray divorce”, or ending the marriage after 50, can wreak havoc on your financial plans. The divorce rate has increased for couples over age 50. In 2015, a study from the Pew Research Center concluded that 10 out of 1,000 married people in that age unit divorced.
In terms of financial matters, the longer the marriage, the more assets will be divided in the end. Here is how your ex-spouse can give you financial problems after a late divorce:
Less Cash and Longer Lifespan
According to 2017 data from the National Center for Health Statistics, Americans aged 65 have a life expectancy of 16.5 years.
The length of the marriage is well-considered when calculating alimony funds, and a decades’ long marriage could call for lengthier payment streams, said Ray Radigan, head of private trust at TD Wealth. This means that the wealthier spouse could give up larger accounts in order to provide spousal upkeep.
In terms of dividing family assets, the older couple will be put to a disadvantage for they will be less prepared for health care costs as soon as they stop working. According to Fidelity, a single woman aged 65 in 2019 will spend $150,000 in medical expenses via retirement, whereas a man of the same age will expect to spend around $135,000. Those expenses do not include long-term care.
Unexpected Tax Penalties
Splitting your accumulated assets can include tax penalties. Updating your savings account, investment account and insurance policies may incur tax landmines. For instance, when trying to split your 401(k) plan with your ex, you will need a certified domestic relations order—a judicial order detailing the payment. Should you opt to distribute the amount instantly from the 401(k) without the order, the amount transferred is topic to taxes.
On the other hand, there is no need for a domestic order for individual retirement accounts. However, your divorce decree needs to specify that you are splitting the IRA. You can do that via a trust-to-trustee switch. Still, you will be subject to sanctions and taxes if you write a check to your ex-spouse, cashing out his or her tranche of the IRA.
It is important to go over your and update the beneficiary designations of all your accounts. Steph Wagner, director of women and wealth and Northern Trust, states that beneficiary designation trumps the will for retirement accounts.
Execute a Prenup
Should you decide to have a second marriage, you might want to consider having a prenuptial agreement before walking down the aisle again.
By doing so, you will be ensured that you will not face a financial burden in case of another divorce. It also saves you from the stress of having to sort out shared properties as the prenup simplifies the process.
In addition, prenup comes in handy in case of the death of the wealthy spouse. The children and the spouse may have disputes over the assets. To secure your estate plan, seek the professional help of a financial planner and your attorney.
More in Love Life
9 Fool-Proof Ways to Beat Stress and Anxiety
With today’s fast-paced lifestyle, heavy demands, as well as the current global health crisis, a lot of people find themselves overwhelmed...May 26, 2020
Is It Safe to See Family and Friends Again Once Stay-at-Home Orders are Lifted? Here’s What Experts Say
Because of the COVID-19 pandemic, our definition of normal has forever changed. Due to shelter-in-place orders and social distancing, family members and...May 20, 2020
Effective Ways to Fight Burnout and Maintain a Healthy Work-Life Balance
Do you feel too exhausted and overwhelmed with your work that you start to disengage and stop caring? It may be...May 19, 2020
How to Lift Your Mood and Stay Positive in The Middle of a Pandemic
Even in the best of times, staying positive can be tough. Especially in the middle of a pandemic. With the news...May 13, 2020
6 Things You Can Do During the Summer to Improve Your Career Potential
With all that is happening in the world right now and the emergence of a new normal, this summer is not...May 12, 2020
Parenting in the Time of the Pandemic: A School Psychologist’s Tips on Adjusting to the New Norm with Your Kids
Raising kids is already a tough enough job, more so in the time of the COVID-19 pandemic. Not only are you...May 7, 2020
Virtual Therapy is Becoming the New Norm for Counseling—Here’s How You Can Get the Most Out of It
As the coronavirus pandemic continues to affect public health and economies globally, rising amounts of anxiety and distress have taken a...May 5, 2020
A Doctor Explains if a Headache is a Symptom of Coronavirus
As per the World Health Organization, the most well-known symptoms of coronavirus include fever, tiredness, and a dry hack- some people...May 1, 2020
If You Want Your Kids to be Mentally Strong, Stop Saying These 5 Things to Them
Mental strength can get misinterpreted. Sometimes, your positive words about something they did or didn’t do can turn into a toxic...April 29, 2020