A gray divorce, or split after age 50, demands careful financial planning before you involve lawyers. The stakes run high because retirement assets, Social Security benefits, and healthcare coverage all factor into the settlement.
Start by gathering complete financial documentation. Pull together bank statements, investment account records, mortgage papers, pension plan statements, and tax returns from the past three years. You need a clear picture of joint and separate property before negotiating.
Next, understand your retirement accounts. If either spouse has a 401(k), traditional IRA, or pension, that asset typically gets divided through a Qualified Domestic Relations Order (QDRO) for workplace plans. Botching this paperwork costs thousands in taxes and penalties. Pensions earned during marriage usually qualify for division, but rules vary by state.
Review your Social Security strategy. If you're over 62, you may claim spousal benefits based on your ex's record, but only if the marriage lasted 10 years or longer. Delaying your claim until 70 boosts your benefit by roughly 24 percent. A divorce settlement can specify who claims when, protecting both parties.
Check your health insurance options. If you're not yet Medicare-eligible at 65, COBRA continuation coverage from your spouse's plan lasts only 36 months. Research marketplace plans through Healthcare.gov or your state exchange well before the divorce finalizes.
Evaluate your home. A house represents the largest joint asset for most couples. Determine whether to sell, buy out your spouse, or keep it. Property division rules differ by state, whether community property or equitable distribution applies.
Consider tax implications. Alimony payments become non-deductible starting in 2019 for the paying spouse and non-taxable income for the recipient under current rules. Asset transfers between spouses during divorce avoid immediate capital gains taxes, but inherited IRAs face different rules