The vow of “until death do us part” seems a little unrealistic to a growing number of Canadian seniors, according to Statistics Canada. In what has been dubbed the “grey divorce” trend, recent census data reveal a 49.7% increase between 2006 and 2011 (311,410 and 466,310 people, respectively) in the number of people aged 65 and older who are divorced.
Part of the reason for this growing trend may rest with the extended life expectancy of most Canadians today. “People aren’t thinking to themselves, ‘Gee, I’ve been married for 30 years,” says Eva Sachs, founder and certified divorce financial analyst with Toronto-based Women in Divorce Financial. Instead, she says, they are starting to look forward to the next 30 years and thinking: “‘Am I really done? Am I settling because I’m at this certain age?'”
Susan Eng, vice president, advocacy, with the Toronto-based CARP (formerly known as the Canadian Association of Retired Persons), also sees this trend among her organization’s members. She believes it stems from the tendency of baby boomers to push the envelope. “The boomers are continuing to do what they always did,” Eng says. “They don’t feel that at a certain age, you don’t do certain things – fall in love again or get divorced or make drastic changes in your way of living.”
Whatever the reasons for divorcing later in life, separation at an older age can have serious consequences for your client’s finances and retirement. Seniors have less time to re-establish themselves financially after a divorce and thus need to consider carefully how their lifestyles will change, says Sachs. One or both of the partners may need to live on less, have fewer benefits or reconsider their living arrangements.
Many people, when looking at their post-divorce finances and making decisions about their new lifestyle, often get caught up in their emotions rather than what is best financially.
In very general terms, the value of the assets acquired and used together during the marriage are divided equally between the spouses. Precisely how this division is arrived at usually is negotiated by lawyers, says Kathryn Jankowski, vice president and financial divorce specialist with T.E. Wealth in Toronto. It can have a big impact on your client’s finances.
Jankowski gives the example of a client who wanted to give up the assets held in her RRSP so that she could keep the matrimonial home rather than having to sell it and divide the proceeds. However, after doing a projection, Jankowski found that the client wouldn’t be able to afford the house and would have to sell it within five years.
By looking at some options, Jankowski was able to find an alternative that this client could afford and was acceptable to her. Says Jankowski: “I looked at the scenario of buying her a house that wasn’t so far out of the neighbourhood that she was comfortable with, that was more affordable, and buying her a car. So, if she wanted to still go to her favourite grocery store or her favourite restaurant, it wasn’t that difficult for her to get to.”
Yet, not every decision will be about your client’s financial future alone. A somewhat surprising trend, according to Sachs, is that many ex-spouses want to continue to provide for one another.
People who divorce later in life, she says, often do so because they have grown apart and don’t have any feelings of animosity towards each other. As a result, the ex-spouses still want to ensure the other is looked after in case of an emergency, such as a health issue.
Therefore, it’s important for your client to find out whether his or her benefit plan will still cover an ex-spouse or if there are plans in place should one partner in the couple become ill after they have separated. “Those are things that are more personal concerns,” Jankowski says, “but [they] cross over into the financial side of things as well.”
It’s not only the ex-spouse that your client might be worrying about. Many older divorcing couples worry about how to break the news to the kids. Particularly in situations in which it may come as a shock, such as in a case of merely growing apart, says Sachs, there can be a real concern about hurting the children, even if they are adults.
However, sometimes a grown child’s concern may not be just over the dissolution of their parents’ marriage; rather, the concern may be the potential for the disappearance of an inheritance.
There might not be much the parent or child can do about maintaining an inheritance after a divorce. However, if a parent decides to remarry, there are steps the parent can take to minimize the impact on the children. For instance, it generally is helpful for the parent to make their intentions about his or her estate clear to the children.
In addition, prior to remarrying, the parent should prepare an up-to-date net-worth statement. The will also must be redone, as the previous will becomes void upon remarriage.
The important thing is to be clear and to be fair, Sachs says. For example, your client may wish to leave half of his or her home to the children once he or she dies. However, that could make the remaining spouse (the step-parent) and the children from the first marriage co-owners of the same house, which could create an uncomfortable situation.
One solution is to provide in the will that the surviving (new) spouse has the option to remain in the home for at least one year, with the option to buy out the kids or simply sell the house.
Of course, while divorce at any age is difficult, both emotionally and financially, there is a silver lining.
It’s about people taking control of their lives and living to the fullest, says Eng: “That’s really the positive note that’s going on. It’s just that at a certain point in your life and your career, there are additional challenges, compared with other divorcing couples, that you have to bear in mind before you make these choices.” IE
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