A recent string of separation announcements from long-term celebrity couples has Americans reconsidering the potential pitfalls when Baby Boomers divorce.
Whether you live in Hollywood, Washington or any part of the country, getting divorced over the age of 50 can lead to significant financial difficulties. By avoiding the following mistakes, you can help ensure that you get the settlement you deserve.
Forgetting retirement fund taxes.
If you are over 50, your 401(k) and other retirement accounts may represent your most valuable assets aside from your home. It's important to understand the true value of those funds, which - when taken out of the account - may be far lower than their balances suggest. The money is taxed when it is withdrawn, usually dropping the value by about 35 percent. If your spouse gets the house and you get the retirement fund, you may be getting an unfair deal.
Undervaluing Social Security.
If you were married for more than 10 years, you may be entitled to your spouse's Social Security benefits when you reach age 62, as long as you do not remarry. If you make less than your former spouse, you may want to claim your spouse's Social Security benefits. If your spouse wishes to claim your benefits, be sure to factor that value into your negotiations.
Forgetting the kids.
Couples over 50 often have older, independent children, which eliminates the need for a child custody battle during the divorce. However, this doesn't eliminate potential financial problems. Set up a plan to make sure that your assets are passed on to your children, as opposed to your ex's new spouse. This can be done with a lifetime asset protection trust, which will also offer financial protection to your children if they eventually get a divorce.
Source: Wall Street Journal, "Divorce Over 50: 3 Mistakes to Avoid," Catey Hill, 23 March 2011