Gray Divorce: Two Ways Women in Transition Can Survive and Thrive Financially

Al and Tipper Gore put so-called gray divorce in the headlines with their announcement, in 2010, that they would dissolve their 40-year marriage. The rate of divorce later in life — sometimes referred to as a “silver split” — has been doubling since the 1990s. The 2019 split between Amazon founder Jeff Bezos and writer-philanthropist MacKenzie Scott was another high-profile example of this trend among those married for 20 years or more, despite the decrease in America’s overall divorce rate.

Divorce for couples later in life can be financially devastating, especially for women whose former husbands earned more and made most of the financial decisions (an arrangement more common among older Americans than younger ones). As Wealth Advisors, we frequently help women who feel scared and helpless while grieving the loss of a union that defined their lives for several decades. It’s important to keep in mind that they aren’t facing this challenge alone; they have ample financial and legal resources. Once they understand what resources are available to support them in their new life phase, it can be easier to make wise decisions. Therefore, women anticipating the dissolution of their marriage later in life should consider the following two crucial steps.

Step 1: Understand How Your Assets Are Allocated

Because it’s common for the income of a woman over 50 to suffer sharply following divorce, it is important to review her former spouse’s income as well as deferred-compensation packages, stock options, ownership stakes, bonuses, and pension plans. In alimony states, these factors should also be considered when calculating compensation levels — not just base salary.

In community property states, it is crucial to establish and document premarital assets. Inheritances should be carefully considered, as commingled assets can play a part in determining how much of the inheritance is separate property.

Step 2: Consider Your Tax Situation

On January 1, 2019, new tax laws went into effect, presenting key implications for those living in alimony states. For decades, alimony payments were tax-deductible for the payer and nontaxable income for the payee. The 2019 law eliminated the tax deduction for the payer and classified alimony as taxable income for the recipient.

Given these changes, in certain situations, it could make sense to structure spousal support in some way other than as alimony payments, such as an alimony “buyout” or another method of property division. Of course, every alternative has both advantages and disadvantages, making it even more important to have sound financial, tax, and legal advice.

If you are facing a divorce later in life, you probably have a lot of questions. As qualified professional advisors specializing in serving women as they navigate, we can help you connect with resources you need now.