Gray divorce refers to couples 50 and older. I recently spoke with Lili Vasileff, a Certified Divorce Financial Analyst, mediator, and litigation divorce financial expert, to provide information about important financial topics to gray divorce couples and their adult children.
KEY POINTS
- Many gray divorce couples are shocked when they learn about the laws in their states governing alimony.
- Social security benefits are not divisible in divorce proceedings.
- Women of gray divorce are particularly vulnerable financially and must take steps to protect themselves.
Alimony Can Be the Most Shocking Point in Gray Divorce
Understanding the criteria for how different states award alimony is crucial.
Posted February 14, 2023 | Reviewed by Vanessa Lancaster
THE BASICS – KEY POINTS
- Many gray divorce couples are shocked when they learn about the laws in their states governing alimony.
- Social security benefits are not divisible in divorce proceedings.
- Women of gray divorce are particularly vulnerable financially and must take steps to protect themselves.
Gray divorce refers to couples 50 and older. I recently spoke with Lili Vasileff, a Certified Divorce Financial Analyst, mediator, and litigation divorce financial expert, to provide information about important financial topics to gray divorce couples and their adult children. Vasileff is a nationally recognized speaker, practitioner, writer, and author of four books on divorce, including Money & Divorce: The Essential Roadmap to Mastering Financial Decisions, published by the American Bar Association.
CH: What is alimony?
LV: When one spouse pays support to the other after divorce, it is called alimony, spousal support, or maintenance, depending on the state. There is a historical basis linking emotions and alimony. In earlier times, divorce could stem only from marital misconduct. Marital misconduct includes cheating, abandonment, reckless spending, concealment of assets, addiction, and abuse. As far back as the Babylonians, a man who had mistreated his wife had to provide an allowance to sustain her and any children.
In the U.S., women did not have property rights during their marriage until the early 1900s and faced substantial gender bias when it came to financial matters until the 1970s. U.S. divorce laws used alimony as a way to level the playing field so a woman could support herself post-divorce. The requirement to pay alimony became linked to guilt. Alimony was the state’s right to publicly penalize a guilty spouse who broke the bonds of matrimony. No-fault divorce laws eliminated the right to alimony and replaced it with an entitlement system that reflects current socioeconomic events and social progress.
CH: Do federal or state laws govern alimony?
LV: Alimony laws differ in every state, and there are several types of alimony depending on your state: temporary, rehabilitative, reimbursement, and permanent. Spousal support can be paid as a lump sum (all at once) or in periodic payments over time. The most common are monthly payments.
In determining whether alimony is necessary and determining the nature, amount, duration, and manner of payment, state laws provide explicit factors that a court may consider. For example, the length of the marriage and exceptional circumstances like disability usually affect the duration of alimony. Nearly 98 percent of people in the U.S. receiving alimony are women.
CH: How do different states calculate alimony?
LV: Generally, the criteria affecting the calculations for alimony are:
- The total combined income of the spouses from almost all sources.
- The capacity of each spouse to pay.
- The needs of each spouse.
Many states use a formulaic approach to calculating alimony; some impose guidelines, while others give more discretion to the courts to determine alimony.
CH: Early in the divorce process, is it easy or difficult or easy to predict the amount of alimony?
LV: Usually, alimony is the last piece of the financial puzzle to be finalized in divorce, following child support and the division of assets. Because alimony closely follows the gamesmanship surrounding these other issues, alimony itself–the amount due annually and the length of time one spouse pays it–is unpredictable.
CH: What is happening in various states about alimony reform?
LV: The hottest button driving alimony reform is lifetime alimony. Both spouses, whether receiving or paying, feel shackled by a legal obligation that often fails to produce financial remedy and finality for the long term. As of 2018, only New Jersey, Connecticut, Vermont, North Carolina, West Virginia, Florida, and Oregon may grant permanent alimony. Permanent alimony is becoming much more uncommon.
CH: What shocks many financially dependent spouses in long-term marriages about spousal support?
LV: Many financially dependent spouses in long-term marriages expect lifetime support. However, the reality is that lifetime spousal support is viable only as long as your former spouse works. Most courts are reluctant to order your former spouse to work past retirement years to pay you spousal support. Clearly, for the spouse expecting spousal support, the window between the time of divorce and the date of retirement threatens financial security and increases stress:
- To produce replacement income from your half of the marital assets. Tip: Maximize your share of assets that can produce guaranteed income (such as pensions and annuities) and avoid risky investments.
- To force you back into the workforce past retirement age. Tip: Target post-divorce employment opportunities that provide healthcare coverage.
- To force you to downsize your lifestyle. Tip: Ask for financial projections and understand underlying assumptions for reaching financial goals.
- To force you to start Social Security benefits before full retirement age. Tip: Be aware of your eligibility for Social Security benefits.
CH: How are older women especially vulnerable financially?
LV: Older women are vulnerable in several ways. Emergency savings are generally low, and many deplete retirement savings before retirement. For older women, the loss of accumulated wealth and income is harshest if they have been out of the workforce for a significant time.
Women 63 and older in the U.S. who went through a gray divorce experience a poverty rate of 27 percent, which is nine times greater than that of married couples of the same age.
Gray divorced women have relatively low social security benefits and relatively high poverty rates. (Keep in mind the maximum social security benefit in 2023 is $4,555 a month at age 70 and $2,572 at age 62). A 2018 survey by Nationwide found that 62 percent of women expect Social Security benefits to be their primary source of income in retirement.
Federal law created rules for ex-spouses seeking Social Security benefits based on their former spouse’s earnings record. You need to know you are eligible to apply if:
- You have not claimed your own Social Security (SSA) benefit.
- Your own SSA benefit is less than 50 percent of your ex-spouse’s SSA benefit (you will receive the higher of 100 percent of your benefit or 50 percent of your ex-spouse’s).
- You are unmarried at the time of application.
- You were married for at least 10 years.
- You have been divorced for at least two years before you apply.
- If you file for SSA benefits before the full retirement age of your ex-spouse, the benefit is reduced by approximately 7 percent for each year claimed before full retirement.
- At age 65, you are entitled to Medicare apart from claiming SSA benefits (if you paid into SSA during your lifetime or you purchase Medicare coverage).
CH: What is the most crucial advice you can give to gray divorce couples?
LV: Make your financial security your priority. Maximize your cash flow from all sources. Plan for your longevity and preserve your wealth.
This is the second post in a series about how to prepare and protect your financial well-being during and after divorce. Read the first post here.
References
U.S. Census Bureau 2013 Survey
“75 Incredible Divorce Statistics in the United States” and “Divorce Statistics on Divorce Rates, Race, Gender, and More” at www.farzadlaw.com
