Older couples who go through a divorce in Illinois have different considerations than those in their 20s and 30s. Many mistakenly believe they won’t have significant financial issues following a split, yet financial difficulties can be a genuine but decidedly different concern.
Common financial blunders in gray divorce
Gray divorce refers to couples older than age 50 who decide to split. Many older couples stumble through the process, making bad financial decisions because of poor planning. Rushing into a settlement to finalize the process quickly is one common blunder. Agreeing to an unfair portion of marital debts will put you at risk if your spouse defaults. Do your homework before you enter negotiations to discover any hidden debt from credit cards, consumer lines of credit, and business debt.
Dividing assets is another common pitfall because of the potential complications. Failing to split retirement assets according to federal law can result in considerable penalties and a loss of future security. Retirement assets are usually the second largest asset group after the family home. You will need a Qualified Domestic Relations Order (QDRO) to divide assets like SEP and simple IRAs. Other assets can be difficult to value on paper and may have significant tax consequences that should be considered.
How can I avoid gray divorce pitfalls?
Many older couples have accumulated considerable assets, so even amicable divorces can become complicated because of asset division. You must protect your future interests even if you don’t want to go through a contentious split. Illinois is an equitable divorce state, meaning marital property must undergo a strategic division so neither spouse will endure extreme financial hardship. Determining how to divide those assets can take months or years.
Consider working with a certified financial planner specializing in gray divorces to help you through this difficult period. Although hiring a planner will incur additional divorce expenses, these professionals can help you avoid mistakes that will cost you money in the long run and jeopardize the new life you want to create.