A SHIFTING FAMILY DYNAMIC
Couples who divorce in their 20s, 30s, and 40s have very different issues to grapple with from those couples who divorce close to or during retirement age (commonly referred to as “gray divorce”). After age 50, needs and priorities shift and change from what they once were. It is important to distinguish these new needs and priorities and ensure the proper resources are identified and utilized throughout this transition so that separating couples move forward in a positive direction.
Although there has been a recent decline in the numbers, the gray divorce rate has been on the rise for years. The divorce rate for those aged 50 and older has more than doubled since 1990 (Brown & Lin, 2012).1
One reason for the increase is that the divorce rate is about 2.5 times higher for people who have remarried. Another reason is that people are living longer and are re-evaluating their level of satisfaction after many years of dedication to their marriage.
Julie Schwartz Gottman, a clinical psychologist discussed some factors that lead to divorce after a long marriage and reveals, “After retirement, [many] male spouses are around 24/7, the cracks in the relationship deepen into crevasses, and the emotional distance becomes more apparent…”.
For others, the tireless work on the marriage has left its irreversible toll. One gray-divorced man’s perspective was featured in an article on the topic. He noted, “You don’t leave a marriage of four or five decades on a whim or for anyone else. My wife and I were unhappy for many years, but we loved our children. We also loved each other for a very long time. We tried so hard. I left only when I realized that my life was at stake — that the stress of our unhappiness together was killing me slowly but surely.”
ADVISING COUPLES AND IMPORTANT CONSIDERATIONS
Many professionals working with gray-divorcing couples have become aware of the oftentimes complex financial planning needs they present. Tax and financial planning specialists may be necessary to ensure each person will have their financial needs met in the future, when earning potential may be significantly diminished. The decision to sell the house is a big one and often with considerable financial benefits to each person. However, the emotional attachments to the marital residence can be profound and working through the emotional piece as well as identifying and discussing the pros and cons from a logical and financial perspective is crucial for parties and the professionals who advise them.
There are many factors to consider when deciding whether to keep or sell the house. It’s important to find out what the home’s market value is and what it would likely sell for in the open market.
If one person wants to keep the house, the next thing to consider is whether or not there is an outstanding mortgage on the property. If there is a mortgage, the person who wishes to keep the house will need to refinance it to ensure their spouse is removed from the loan obligation. The person keeping the house will be responsible for buying out their spouse’s equity in the house plus taking on all future costs associated with sole home ownership. If the person who wants to keep the house decides to sell the house later down the road, that individual will be required to pay all of the costs associated with pre-listing repairs, whatever inspection repair items are negotiated with the buyer, and the fees and commissions of that later post-divorce sale; whereas, if the property is sold during the divorce process and pursuant to court orders, a mediated agreement, or by way of Collaborative divorce settlement, those costs, fees and commissions will be paid off the top, and the parties will share the net proceeds. Capital gains tax consequences may also affect the decision whether to sell as a couple at the time of divorce versus waiting to sell, as an individual.
UTILIZE SPECIALISTS
Working with a mortgage lender who has expertise and experience helping divorcing couples will assist in determining whether the person who wants to keep the house will be able to refinance in the first place and if not, what other options there may be, including but not limited to the liquidation of assets or having a co-signer on the loan – both of which may come with their own tax implications or other issues in the event of default.
The earlier on in the process the application for a new mortgage is submitted (ideally, before mediation or early on in discussions with a financial neutral) the better informed all will be about what will be required to keep the house and if it is realistic or not.
Before refinancing the mortgage, it may be wise to ensure agreement and a date certain for the other spouse to agree on transferring title of the house to the sole homeowner’s name. Also, keep in mind that if one person is relying on maintenance from the other in order to keep the house, that maintenance has to have been received for at least three months on a consistent basis and ordered to continue for at least three years.
Many people will financially benefit from thoroughly exploring the various mortgage options available and utilizing the one that makes the most sense for them. For example, anyone who is 62 and older may wish to utilize a Home Equity Conversion Mortgage to refinance or a Home Equity Conversion Mortgage for Purchase to buy their next property (often referred to as Reverse Mortgages). The benefit here would be that the mortgage payments stop, easing the financial burden of making those monthly payments, allowing for more cash flow for living expenses. Consulting a lender who specializes in these particular loans will assist in determining if a person qualifies and if it is the right fit under the circumstances.
A FRESH START
Selling the house is another option. It may be wise to rent temporarily, buy a smaller home in an effort to benefit from more cash flow, purchase a property with newer construction and fewer necessary repairs, move into a condominium with a reasonable HOA payment, or relocate closer to family or to a retirement community where there are specialized amenities available and a focus on high quality of life. For a discussion specific to senior living and housing options, check out https://mynewdigs.info/our-needs-change-as-we-age-do-you-know-what-home-environment-options-are-available-for-your-loved-ones/.
The bottom line is this: A lot of variables must be factored into the decision to keep or sell the house — including the financial situation, tax implications of the sale based on the particular circumstances, if there is also a vacation home to sell, individual lifestyle needs, and the local real estate market conditions.
REAL ESTATE AGENTS: NOT ALL THE SAME
If selling the house is a consideration, choosing one real estate agent to potentially work with each spouse can save time, money, and frustration. A REALTOR® with a certification and specialization in real estate divorce sales will help ensure proper communication regarding the process with the homeowners, any attorneys involved, and title company professionals. The agent will also take appropriate steps to ensure compliance with relevant court orders or settlement agreements so that proper disclosures and contract language in the listing and sale agreements are incorporated.
Selling the marital home has provided a rejuvenating fresh start for many couples who divorce later in life. But the transition is also likely to be a frightening time full of worry about stability, comfort, and security. And, selling the home is not always the right choice. The more information and support these separating couples have, the better decision they can make so that they are on their way to enjoying the next chapter in their lives.
Gabriela Sandoval is a Certified Real Estate Divorce Specialist (CREDS), Seniors Real Estate Specialist (SRES), and Pricing Strategy Advisor (PSA) with Keller Williams Integrity Real Estate in Denver. She is also an attorney and trained domestic relations mediator. She can be reached online at www.mynewdigs.info or by phone at 303.621.5992.
1 See Gray Divorce Rate in the U.S.: Geographic Variation, 2017 available online at https://www.bgsu.edu/ncfmr/resources/data/family-profiles/allred-gray-divorce-rate-geo-var-2017-fp-19-20.html and https://www.bgsu.edu/ncfmr/resources/data/family-profiles/allred-age-variation-div-rate-fp-19-13.html
