Legal Considerations in Wisconsin "Gray Divorces"
Divorce rates in couples over the age of 50 (commonly called “gray divorces”) have doubled since 1990 and nearly tripled for those 65 years and older, according to Pew Research Center. The rates are even higher for remarriages in those age groups.
While the laws are the same for couples divorcing at any age, older couples have had more time to acquire wealth, such as home ownership and investments. This is especially true for couples who have been married for decades.
However, if both spouses are retired in divorce, they might have little or no employment-based income. Individual social security checks are not typically enough to live on. And dividing financial accounts and investments means less planned retirement income for both parties.
Fortunately, most children in gray divorces are adults (or near-adult age), which eliminates common expenses such as child support. But financial support for adult children, such as college tuition or health insurance (for those 26 and under), or support for an adult child with special needs, could affect the couple’s finances after a split.
Many gray divorces are among couples who have children from prior relationships or marriages. A divorce without a Marital Property Agreement could reduce the assets a parent had planned to leave to their own children or grandchildren. Most property (if not inherited or gifted) will be divided equally because Wisconsin is a marital property state. However, if a substantial amount of property is brought to the marriage by one spouse, that may affect property division.
With strategic and thorough planning, the lawyers at Murphy Desmond strive to protect our clients’ rights, with a goal of helping them prepare for the next chapter of their lives.
Finances look different following a gray divorce
Depending on factors such as -- how much money a couple has saved, the assets they have, how long they’ve been married, the health of both spouses, and if either spouse is still working -- gray divorces can be complicated.
The following are common financial considerations in gray divorces:
Home Ownership
While a house might be paid off, if one spouse keeps the house, they will need to pay the departing spouse for their equity in the home at current market rates. Buying out the other spouse could result in a new and unaffordable mortgage payment and potential capital gains tax when selling in the future. For this reason, many couples choose to sell the home while still legally married and split the proceeds.
Multiple Property Ownership
Couples who own more than one home or have significant equity in one or more properties might choose to sell some or all properties. The couple’s property division will determine if one spouse needs to pay the other when one spouse keeps a property.
Other Physical Property
Vehicles, boats, timeshares, season tickets, jewelry, home furnishings – all these assets need to be divided. Consider, too, debts still owed on these items. Foregoing certain assets, such as a vehicle or investments, can help toward buying out the other spouse in the property division process, especially if one spouse wants to keep the home.
Marital Debts Owed
If a couple has significant debt -- such as loans, medical bills, mortgages, or credit cards -- all debts must be disclosed prior to the divorce. Debts are included in property division.
Financial Accounts/Investments
It is important that both spouses are aware of every financial account, including bank accounts, IRAs, stocks and bonds, money markets, and more. Oftentimes, one person in the marriage handles the finances, and the other spouse is unaware of certain assets and debts. It is required by law that all financial accounts and debts be disclosed. In most cases, all financial accounts would be considered marital property.
Digital Assets
While this can include online financial accounts, it can also include cryptocurrency and any other web-based accounts with value such as PayPal accounts, music libraries, subscriptions, prepaid funeral/burial services, etc. Be aware of all digital accounts with monetary value.
Pensions/401k and Employer-based Financial Accounts
Typically, a 401k, IRA, and pension can be divided through a Qualified Domestic Relations Order (QDRO), which is a process that transfers an agreed-upon amount after a divorce is final. In Wisconsin, state workers have a Wisconsin Retirement System (WRS) process that could include a pension or other retirement funds. A valuation of WRS assets is important. Additional information can be found here.
Life Insurance Policies
Depending on the type of life insurance (term or whole), the value of these policies might also be considered assets. Beneficiary designations should be updated on life insurance plans, as well.
Health Insurance Expenses and HSA Accounts
Healthcare might be covered primarily through Medicare starting at age 65, but many people divorce earlier than that and will need health insurance coverage for many years. Depending on whether the spouses still work and have employer-based health insurance, health insurance, medical bills, and long-term care can become a significant expense for a single person. Is there a Health Savings Account (HSA) that can be split to help offset expenses? Will one of the spouses keep a child on an employer-based healthcare plan until age 26? Also, be aware of all debts currently owed to health insurers or medical providers when reviewing debts.
Estate Plans (Wills, Trusts, Powers of Attorney)
Prior to the divorce, if the couple has Trusts with assets for intended heirs (such as children or grandchildren), they should discuss plans for those Trusts with their estate planning attorney. Powers of Attorney documents can be updated as needed while still married, since many divorcing couples do not want their current spouse in charge of healthcare or financial decisions if they become incapacitated. Couples might also want to rename the personal representative and beneficiaries of property indicated on their Wills.
Social Security Income/General Income
When individual spouses qualify for social security beginning at age 62, the spouse who made less money can review options of taking their own social security or a portion of their ex-spouse’s social security. To qualify for spousal social security benefits (keep in mind, the spouse with the larger social security will still get their full amount), the couple needs to have been married at least 10 years. Frequently, social security is not enough money to live on, so the division of other assets is important to help ensure an affordable lifestyle. Cash from the sale of a home or drawing from investment income can help supplement social security income. Some people find they need to work if social security is not enough. A financial planner can help determine the best options.
Maintenance/Alimony
Gray divorces often come with maintenance/alimony to the spouse with less income. Factors considered include length of the marriage, age and physical health of the parties, earning capacity of the party seeking maintenance, and the feasibility that the party seeking maintenance can become self-supporting. Earning potential may be limited due to age, health, or lack of recent work experience, according to Wis. Stat. § 767.56. Maintenance/Alimony is important in many gray divorces, especially if one spouse left the workforce many years ago to raise the children or be a full-time homemaker, and if the other spouse is still working and taking home a salary.
Family Business/Family Farm
Divorces can become more complex when a family business or farm is involved. Ideally, the entity has a Buy-Sell Agreement to address transfer of ownership if one spouse wants to sell or if members want to remove an owner or if an owner gets divorced. A business lawyer can help with business valuation and other issues resulting from the dissolution of a marriage in family businesses or farms.
Beneficiary Designations, Joint Titles
Be aware of all payable-on-death accounts so you can change the beneficiaries, if necessary. Following a divorce, estate plans should be updated immediately, as well as joint titles, transfer-on-death deeds, quitclaim deeds, bank accounts, etc.
Credit Cards, Auto Payments, Memberships
Cancel joint credit cards or joint memberships such as country club memberships, wine clubs, season tickets, automatic payments of any bills, etc.
Is divorce the only option?
Divorce is not always the only option, and alternatives might work for couples who have been married many years, especially if they remain amicable.
Legal Separation
If there are religious reasons or other deeply held convictions that make divorce unacceptable, a couple may choose a legal separation.
In a legal separation, a couple typically agrees to live apart with court-ordered arrangements. It is similar to divorce except the parties cannot remarry another person.
Legal separation is also similar to being married in terms of certain financial benefits, which can include: tax savings by filing jointly, social security benefits, maintaining joint titles and deeds, HSA benefits, and staying on an employed spouse’s healthcare plan. Legal separation might be ideal for a couple with a WRS plan with the State of Wisconsin. Those retirement benefits can be lost entirely if a couple divorces and the individual recipient of the divided plan passes away.
Similarly, a legally separated couple can maintain joint ownership of a family business if other members agree. A Buy-Sell Agreement is still recommended for any family business.
Utilizing separate bank accounts for expenses is typically advised in legal separation. Dividing certain investment accounts might be an option, as well. Beneficiary designations on individual accounts or life insurance may be updated as the parties wish.
Also, if a couple decides to get back together, they can simply terminate the legal separation.
Remain Married but Live Apart
Other couples might choose to remain fully married but live apart.
Financial benefits to remaining married but living separately could include affordable health insurance (if one party still works), continued growth of joint investment accounts, tax benefits, business ownership stability, shared child expenses like college tuition, and being able to maintain Trusts and other estate planning strategies for chosen heirs.
Financial risks of remaining married but living separately include the risk of acquiring new marital debt by one spouse, excessive or inappropriate spending, and inequitable withdrawals from certain financial accounts.
A Postnuptial Agreement is advised for couples who remain married but live apart. This contract is prepared while married. It can designate individual legal ownership of property and how expenses will be paid. It can assign certain debt to one spouse. It can also aid in estate planning or to simplify a future divorce.
If couples remain married but live apart, they should have legal agreements in place regarding jointly titled assets and how to pay off current debts. Utilizing separate bank accounts, designating expenses to individuals, and use of shared financial accounts could be arranged.
Murphy Desmond family law attorneys can help with gray divorce and other family law matters
At Murphy Desmond, our family lawyers strive to ensure fairness, equity, and clarity for our clients in divorce and legal separations and in creating Marital Property Agreements. We work to help identify issues and solutions that matter most to you. Contact us at email@murphydesmond.com or call our main phone number at 608.257.7181 for a consultation. We have family law attorneys in Madison, Dodgeville, and Janesville, Wisconsin.
