Divorce and the Over 50’s

Recent statistics reveal that divorce rates between the over 50’s have increased in marked contrast to a general decline in divorce rates for other age groups.

So why is this and what should the so-called “silver separators” take into account if they do decide to separate?

Reasons for later life divorce

It is worth mentioning that most divorces, particularly in the older age groups are started by women, usually on the grounds of their husband’s unreasonable behaviour which links the trend for divorce in later life to the reduced social stigma of divorce, the changing role of and increasing financial independence of women and the fact that, with age, staying together for the sake of the children is no longer a determining factor. 

Special factors to consider for older divorcees

Where a couple has had a long “traditional” marriage the court will recognise the equal contributions of the housewife/mother, who may have taken a back seat to her husband’s career and taken primary responsibility for caring for the home and children. In most cases the wife will be entitled to at least an equal spilt of the family assets.

Compare this with couples who marry later in life, often after divorce or widowhood, where one or both parties may have acquired significant assets before the marriage or have children whose interests they want to protect. These couples may benefit from a pre-nuptial agreement.

Pre-nuptial agreements

A recent Law Commission Report endorsed the need for legislation to give effect to pre-nuptial agreements. With regards to a pre nup, where the parties have made full financial disclosure of their assets, had independent legal advice, understand the implications of entering into the agreement and are doing so without undue pressure, the courts are likely to uphold the pre nup.

However, in this country, pre nups are not the norm and for the great majority of older divorcees, divorce is likely to entail a level of financial hardship.

Pensions assets

Pension assets are among the most complex issues to be resolved on divorce. Expert advice must be sought from an experienced family lawyer. Most pension issues are resolved by a “pension share” which involves a percentage of one party’s pension(s) being credited by internal or external transfer to the other spouse.

The true value of an occupational pension scheme is not always it’s so called “cash equivalent value” and there are many traps for the unwary. Advice is needed as to whether to share the “cash equivalent value” or to divide pensions to produce equal income on retirement. The two approaches may provide very different figures.

Further complications may arise as a result of lifetime allowances (LTAs) and the tax consequences of having funds that exceed the member's LTA.

If the couple decide to offset the pensions so that one retains the larger pension and the other takes a larger share of the liquid cash, expert actuarial assistance may be required to calculate the value of the benefits and the appropriate offsetting sum.

“Matrimonial property”

On divorce, property acquired pre-marriage or inherited (non-matrimonial property) may be treated differently from property acquired by the efforts one or both parties during the marriage (matrimonial property). Non-matrimonial property is not however automatically excluded from the “pot” and again expert advice is needed on this issue which is complex and much misunderstood.

The matrimonial home is usually regarded as a joint marital asset, even where it is owned solely by one party. However rehousing may present challenges for older couples who may have downsized and have less available cash and to whom mortgages may be unavailable.

Valuing pre-acquired assets

In long marriages, issues may arise over identifying and valuing assets which one party brought into the marriage many years before. This is particularly true where non-matrimonial property has changed identity and value during the marriage, or has been mixed up with matrimonial property.

Issues can also arise over the need to make provision for children and grandchildren from a previous relationship.

Tax considerations

Divorce for older couples may result in the loss of various tax advantages, particularly in relation to inheritance tax and estate planning and advice is needed in this complex area.

The ability to defer use of the nil-rate band of a spouse will be lost on divorce as will other potential tax planning strategies. 

The power to transfer assets between married couples themselves without any CGT arising on the transfer will be lost on divorce. It is important to take advice as there could be tax penalties if a couple separate on 5th April and then transfer assets on 7th April (which may not be true had they had taken advice and waited a day or two before leaving). Any disposals that take place after the tax year of permanent separation are normally chargeable.

Income tax

The ability to transfer shares or savings to a non-earning spouse to take advantage of income tax allowances is lost on divorce.

Consequences of the rising divorce rate for over-50s

A recent report outlined some of the possible implications of divorce for the increasing number of people over the age of 60 seeking divorce from their spouses.

These include:

• financial difficulties, especially for women who have given up work to care for children and who have no long-term savings of their own;
• divorced couples not having a spouse to rely on at times of illness or disability, meaning that their care in illness and old age falls on children or paid carers;
• divorced older men being more likely to rely on institutional care than divorced older women, who were more likely to be able to rely on their children.

 Are there alternatives to divorce?

Yes. If couples want to separate but do not necessarily require a divorce they could enter into a financial agreement to regulate their financial affairs following separation. Expert advice is recommended to ensure that such agreements are effective. 

It is not however possible to obtain a pension sharing order without divorce, although widows' pension rights will usually continue post separation. 

There can be Inheritance Tax and CGT advantages to staying married. 

The future

The increase in those over the age of 50 experiencing divorce shows no sign of abating and those marrying in later life in particular do need to address the risks and take pragmatic steps to ensure that if the worse happens each is treated fairly.