You might have heard (or experienced yourself) that couples approaching divorce were living completely separate lives by the time the paperwork went through. While this may be true for professional, social, and even family lives, it can be very difficult to disentangle your financial life from that of your spouse. After all, the longer a couple stays together, the more financially connected they become.
This can be doubly complicated for those who have spent what seems like a lifetime together. Couples approaching divorce after age 45 may have children in college, new partners to consider, Social Security elections to ponder, and all kinds of assets, liabilities, and complexities to figure out.
However, what may seem overwhelming at first can be tackled with a little bit of strategy and planning. It can be hard to get started, but it’s worth it to start your new chapter on solid footing.
Clarify Marital Finances
If you’re navigating through a divorce in your late 40s or beyond, you may have already accumulated wealth or income-generating assets. This makes an inventory of your joint net worth (with your ex) a crucial starting point.
Start by putting together an inventory of assets: your bank account, investment accounts, retirement plans, real estate holdings, insurance policies, and other personal or financial properties (view our divorce planning guide to get started!).
There are a few crucial pieces of information you’ll need:
- The official account owner/titleholder
- Whether the account or asset was pre-marital property
- Current compensation for each spouse (through assets or other income sources, like employment)
When it comes to income, accuracy is vital. Only alimony and child support are based on current income, but senior professionals with complex compensation packages have to factor in perks like bonuses, restricted options, travel allowances, and ownership stakes.
The other side of this equation is debt. Just like you did for your assets, you’ll need an inventory of debts, including mortgage, HELOCs, credit cards, student loans, personal loans, car loans, etc.
Don’t forget to keep track of ownership on this front as well: who incurred the debts, and were they pre-marital or post?
Prepare to Negotiate
Even for late-career professionals with no kids and a prenup, the asset and liability split conversation can get contentious. Bring in any of the many complicating factors that most of us experience in our lives and you have all the ingredients for serious conflict.
That’s why we advise going into this process with clear priorities—and if you can get on the same page about those priorities with your ex, all the better. A common unifying priority could be the kids: even if they don’t live with you anymore, what do you want for them at the end of this process?
Even without shared priorities, it’s important to take stock of your priorities and expectations—and what you can compromise on versus what is a must-have. This will help you to walk into these discussions prepared to negotiate without forgetting to advocate for yourself.
The process will also depend on your state of residence: for example, here in Michigan, divorce settlements are based on “equitable” distribution, with the idea of trying to find the solution that’s most fair for the particular situation. On the other hand, a “community property” state will seek as close to a 50-50 split of marital assets as possible. Depending on where you live, the length of your marriage might also come into account.
Do Not Forget About Your Retirement
As part of this negotiation process, it’s critical that we highlight one key variable: retirement. We believe that protecting your retirement is crucial for those divorcing after 50, as hard as it can be to hear, you simply don’t have the decades-long onramp to retirement that a divorcee in their mid-30s has.
Be sure to consider what you expect, hope for, and need in retirement—and don’t forget to include some “what ifs” if things don’t go to plan. When we do this type of planning with our clients, we take the time to consider how their current lifestyle needs might change, identify potential income sources, and put in some guardrails for any sudden changes to health, income, or other key variables.
This information is crucial when you get to the negotiating table because different types of qualified retirement accounts and pensions can face different rules and tax implications in a divorce. If you start out by having an idea of what you’ll need, it’ll be easier to navigate the asset split in a way that helps preserve your financial security.
Navigate with Certainty
These are the basics—but of course, for many 45+ divorcees, divorce is anything but. Especially after decades of comingled finances, it takes time to account for both the “usual” stuff and the more complex issues related to insurance and tax. For example, life insurance can be a particularly thorny issue for some divorcing couples.
Muddling through all this alone, or only with the help of an attorney with no financial training, can make the process all the more difficult. We’ve been there, and it’s one of our core missions as a firm to help people avoid the pain, stress, and confusion that comes with it.
With the help of a Certified Divorce Financial Analyst (CDFA), you can navigate this process with guidance from someone who’s seen it before—and who can help you avoid the mistakes and complexities that plague many divorcees.
While divorcing in your 40s or later can feel overwhelming, having a plan goes a long way toward minimizing the inevitable stress. With the right planning and approach, you can start this new chapter of your life on the right foot (and with a minimum of unnecessary pain). We’re here to help you start that process, and make sure you get started in a way that will benefit you, and your family, the most in the long run.