You might be one of many people in Minnesota or beyond who stayed in a struggling marriage for decades for any number of reasons. Perhaps, you wanted your children to grow to adulthood with both parents under one roof. Maybe you just kept hoping things would get better between you and your spouse of many years.
The rate of divorce among people age 55 and beyond has greatly increased in the past 20 or so years. While those who end their marriages at a younger age are often centrally focused on child custody issues, older spouses are often concerned about their retirement benefits, long-term financial provisions and other possible consequences that might impede their ability to adapt to a late-life, independent lifestyle. It’s a good idea to research finance-related divorce laws before heading to court.
Alimony tax laws have changed
Recent law changes may have a significant impact on your finances in divorce, no matter which side of the equation you happen to be on. It used to be that a spouse paying alimony could claim the amount as a deduction on his or her tax forms. A person receiving alimony had to pay taxes on the amount as a form of income. Now, alimony or spousal support is no longer taxable or deductible.
Marriage longevity can definitely affect your settlement
If you and your spouse were married 10 years or more, Social Security benefits may be a key financial factor in your settlement. Especially if one of you earned a substantially higher income than the other did, the lesser-earning spouse may be entitled to half of all such benefits for the rest of his or her life, provided he or she does not remarry.
Understanding a Qualified Domestic Relations Order
A QDRO is a document many older spouses use when negotiating terms for a financial settlement in divorce. This document essentially gives a spouse the right to transfer a portion of the other spouse’s retirement benefits without creating a taxable event, such as those associated with a 401k or individual retirement account.
Did you already execute an estate plan?
One of the most common errors people make after signing estate-planning documents is forgetting to periodically review and update their plans as needed. If you have a last will and testament or other estate planning documents in place, it is critical that you review your plan to consider the implications your divorce might have on your existing arrangements.
Seeking clarification of estate planning and divorce laws is always best to prevent financial complications down the line. Especially regarding your spouse as a beneficiary, there may be issues you’ll want to address and changes you’ll want to make. Lengthy probate battles often occur among family members of decedents who failed to update their plans before they died.