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Seniors not exempt from divorce — protect yourself financially

January 18, 2019

January has the dismal title of being called “divorce month.” The number of divorce filings spikes each January. Many couples do not want to put their families through the trauma of divorce during the holidays, so they wait to file after the new year.

No matter the time of year, divorce does not come cheap. The average divorce in Texas costs $15,600 and takes 12.5 months.

Older adults are not exempt from the divorce statistics, according to the Pew Research Center, since the 1990s, the divorce rate among those 50 years of age and older has doubled.

The realities of divorce are stark, especially during retirement years. Those divorcing later in life tend to be less financially secure than those who are married or widowed. For example, if a couple has helped put their children through college, their investment assets and savings accounts may be low or depleted.

Additionally, there is not as much time left to build savings through a career.

People tend to underestimate the cost of living separately.

The retirement monies you may have been saving to support one household must now be split to support two households.

Additionally, there are tax consequences to consider. Dividing an IRA, which includes pre-tax dollars, is not the same as dividing savings or investments. As always, discuss these matters with your tax advisor.

It is imperative that you have an understanding of how much it will cost to maintain your lifestyle.

Remember that planning for your financial life after your divorce begins with a comprehensive compilation of your pre-divorce financial records. Make sure you are keeping a list of your income and expenses.

These numbers are essential when the judge is deciding how to split assets and debts. Some expenses may reoccur weekly, monthly or annually. Other expenses may be one-time payments, such as a new roof.

In all cases, keeping an exhaustive list will help you demonstrate your financial needs.

Furthermore, gather all important documentation including, but not limited to, paycheck stubs, retirement account information and tax returns. Other information to consider include which money is allocated among stocks, bonds and cash; other assets such as businesses and art; and who owns which investments.

As tempting as it may be to change life insurance beneficiaries and close joint banking accounts before the divorce is finalized, do not act on these impulses. Use accounts as normal and hold off on major financial decisions. The judge will want to see your joint financial records intact before splitting up your financial affairs.

In addition to consulting a divorce attorney, talk with your financial advisor when seeking divorce advice and sorting through your financial matters. Also, remember it is important to have your own financial advisor. You may have shared one with your spouse pre-divorce.

Your own advisor will help you understand your new long-term goals and needs on a completely confidential basis. A divorce can be hard on all parties involved, stay on top of the financial details to help protect your bottom line and your future.

Claudia Mollerup-Madsen is vice president and a financial advisor with the Wealth Management Division of Morgan Stanley in Houston.

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