Attwood Marshall Lawyers Family Law Special Counsel Hayley Condon and Associate Laura Dolan discuss the rise of so-called “grey divorces,” exploring the legal complexities and financial implications one needs to consider when splitting up later in life.
For many couples, retirement is a time to reflect on everything they have achieved and the family they have raised whilst enjoying the fruits of their labour. This is meant to be the time to focus on yourself and spend more time with your significant other.
Unfortunately, it can also be during this time that some couples realise they are no longer happy or fulfilled in their relationship and make the difficult decision to split and go their own way. Without the distractions of children, an empty nest can often accentuate any unresolved issues that have been swept under the rug.
Divorcing later in life
A term that has become widely used to describe the separation of couples aged 50 and over is “grey divorce.” Grey divorces are becoming more common than you think.
According to a study undertaken by the Pew Research Centre, the divorce rate for this particular age group doubled between 1990 and 2015. Further, AIFS statistics state that in 2021, over a quarter of divorce applications are for those who have been married for 20 years or more, up from one in five divorces in the 1980s and 1990s.
Every relationship is different, but here are three common reasons why divorce for older couples is on the rise:
- Couples feeling disconnected or growing apart: After years of being busy raising children, meeting work demands, and maintaining friendships and other social activities, couples can move in different directions. When facing an empty nest and there aren’t quite so many distractions, couples realise they may not have as much in common as they once did.
- Couples unable to resolve conflict: If conflict goes unresolved, resentment can build up over time. If couples cannot communicate effectively or give the time and energy required to resolve conflict as it arises, anger can simmer beneath the surface to the point of no return.
- People reflect on the “time they have left” and do not want to spend their remaining years in an unhappy or unfulfilling relationship. Some people in their later years have a sense that the clock is ticking, and they do not want to try to fix something they are no longer happy with, instead choosing to walk away and start “fresh”.
The pandemic also allowed people to reflect on their circumstances and whether they wanted to remain in their current relationship.
Some families were faced with financial strain and forced into isolation in one home for lengthy periods without any outlet. For couples already experiencing issues in their relationship, this may have put additional strain and stress on it to the point of breaking.
Essential things for people 50+ to know if they are considering separation and divorce
Going through a grey divorce presents different obstacles than separating earlier in life. In most cases, children have left the nest and are no longer at home or dependent, and planning for retirement is well underway. But all those plans can come undone if a relationship suddenly ends and you must divide up assets that you have accumulated throughout your lifetime.
The focus is more on how separation may impact retirement plans, superannuation balances, and the ability of both parties to support themselves into the future.
Many people in their 60s and up have limited to no earning capacity, so divorce can have a big impact on the decisions they make about retirement living and potentially transitioning to aged care.
Interestingly, grey divorce can be financially devastating for women compared to men. According to the University of Melbourne, men see a modest 5 per cent drop in their disposable income after separation. In comparison, women experience a staggering 30 per cent reduction.
Women often take time off or work part-time during child-rearing, leading to lower retirement savings. While younger women may also struggle financially after divorce, they have the advantage of time. They can typically return to work and rebuild their financial footing over more extended period compared to older women.
How divorce later in life can affect someone’s retirement plan
Firstly, the couple is faced with the prospect of having to divide up the assets they have accumulated during their lengthy relationship. They will be moving forward individually with less money than as a couple, impacting their retirement plans and what they can afford for their future.
There are many important factors to consider here. Will both parties sell the family home and move on? Or will one party retain it? Additionally, it’s crucial to consider superannuation and whether one spouse’s member balance will be divided with the estranged spouse.
Superannuation is an important component of retirement planning, and unsurprisingly, is one asset many people would prefer to leave out of a property settlement when divorcing later in life. However, superannuation is treated just like other assets and is put in the overall asset pool to be divided.
If parties are retired, this raises another complexity as their only source of income for support will generally be their assets, such as dividends from a share portfolio, superannuation pension or rent from an investment property.
Determining how to divide assets at this stage of life can be challenging and often more complex compared to a separating couple in their 20s or 30s, as there tends to be more wealth to divide.
This is just one reason why obtaining legal advice from an experienced family lawyer about your rights and entitlements is essential if you decide to separate from your spouse.
Is there a set formula as to how property should be divided?
Generally, the first phase people go through when a marriage breaks down is the grieving stage. This isn’t just for the couple involved, but also the family unit as the whole family dynamic shifts.
There is no doubt that divorce later in life has financial consequences, however the division of property during separation will always come down to what is considered “fair and equitable”. There is no single rule that applies to all, and each matter is determined on its own facts and merits as to who will get what.
What will be taken into account is:
- The contributions made by each party both during the relationship and after separation, including financial contributions, non-financial contributions and contributions made to the welfare of the family; and
- Future needs considerations such as both parties’ age, health and earning capacity.
This may result in an equal division of property, or it may not. One of the most difficult things to remember is that a property settlement should be treated like a business arrangement.
It is a family lawyers’ duty to help their clients negotiate effectively and reach an agreement at the earliest opportunity so that the client can move on with their life.
Other things that should be considered when separating from your spouse later in life
It is always recommended that immediately following separation, you:
- Review your Will and any Enduring Power of Attorney or Appointment of Enduring Guardian documents you have in place. It is common for a party to name their estranged spouse as Executor and Beneficiary in their Will. In addition to a Will, you may have an Power of Attorney or Appointment of Enduring Guardian appointing your estranged spouse, which gives them the power to make all important financial, health care, and personal decisions in your life if you lose mental capacity and cannot make those decisions for yourself. After a couple separates, it is usually expected that the parties do not want their estranged spouse to have this level of power to make decisions for them, or to benefit under their Will. Separation is a time to review and update these documents, ensuring they reflect your current wishes. If you do not have a Will or EPOA/AOEG in place, this can also be a good time to draft these documents while you are already engaging with your lawyer.
- Don’t forget to check your binding death benefit nominations for superannuation accounts or any nominated beneficiaries for a life insurance policy. Review and change these if necessary. These are generally forgotten in the aftermath of a relationship breakdown as people focus on the immediate issues of dividing property, moving to a new house, and moving on with their lives.
Given that life events can occur beyond our control, it is always best to resolve property matters promptly after separation and dissolve your marriage as soon as possible. Note that you must be separated for at least 12 months before you can apply for divorce.
If this is left too late, it could lead to unexpected outcomes. For example, say you pass away and, at the time of your passing you are separated but not divorced, have not formally resolved property matters with your estranged spouse and still own a home with them as a joint tenant. That spouse will automatically take ownership of the property.
Not resolving property matters promptly also limits your freedom to choose what new property you wish to buy or investments you wish to make. If you change your financial position before resolving property matters, you risk those new assets being included in the asset pool.
Is a property settlement costly?
Finalising property matters does not need to be costly or involve an extended legal battle. Separation and property settlements can be as straightforward or as complex as you choose.
Parties can settle matters through negotiation or mediation without having to set foot in the door of a courtroom avoiding the stress, delay, or expense of litigation.
It is imperative that once a property settlement agreement has been reached, it is formalised and recognised as legally binding under the Family Law Act. There are two main ways to achieve this: through a binding financial agreement or through a consent order. This will protect you from your spouse coming back later, trying to reclaim a larger share of the asset pool.
Formalising your property settlement also offers taxation benefits. These include not paying stamp duty or registration costs for transferring assets between spouses.
Separation can be challenging for families. Both parties can make decisions in haste, based on emotion. It is always best for all parties involved to obtain independent legal advice from an experienced family lawyer before embarking on the property settlement process. It can be just as difficult for people 50 and over, as it can be for people in their 20s and 30s.
Attwood Marshall Lawyers – Supporting families through difficult times
Attwood Marshall Lawyers has a dedicated family law team who practice exclusively in family law matters. The team is well-versed at assisting clients with divorce, property settlements, binding financial agreements, parenting disputes, and estate planning.
We can help you understand your rights and obligations and will guide you through this challenging time and change in your family circumstances. We want to help you move on as quickly as possible and reduce conflict with your former spouse.
For advice, please contact our Family Law Department Manager Donna Tolley, on direct line 07 5506 8241, email dtolley@attwoodmarshall.com.au or free call our 24/7 phone line on 1800 621 071.
