Gray Divorce- Estate Planning and Long-Term Care Planning
It’s true... Baby Boomers are changing the way we think about work, retirement and, yes, divorce! Baby Boomers in general are more independent, more physically active and working longer than generations before them. As a result, Baby Boomers are living longer. Perhaps this is why there has been a surge in divorce among people over 50… better known as “gray divorce.” A Bowling Green University study found that the divorce rate for people aged 50 and older doubled from 1990 to 2010.
Although there is no good time to go through a divorce, some of the issues involved in “gray divorce” differ from those divorcing at a younger age. People going through a “gray divorce” tend to have fewer working years ahead of them which could affect their plans for retirement; people in their 50s and older may have complicated assets that they share jointly or that greatly affect the family income; and often times older couples have adult children with adult opinions that may make the divorce process more difficult.
It is common that couples who have been together for years may have executed estate planning documents, such as wills, trusts, powers of attorney and advance medical directives. More often than not, the spouse names the other spouse as the agent, Executor, Trustee and/or Personal Representative. Couples often forget or overlook revising these documents to remove the spouse, which may pose a problem in the future. It is extremely important to review your estate planning documents when getting divorced, in order to make any necessary changes to keep your wishes integrated into your plan.
As “gray divorcees” are in their later years, their biggest concerns and challenges in getting divorced are often making sure there is enough money to provide a comfortable retirement for each party. Financial issues in divorce, especially in “gray divorce,” are often complex and parties of a “gray divorce” should seek the help of financial advisors, divorce attorneys and elder law attorneys to help determine the best way to divide assets in a way that provides the most financial stability for both parties.
In the planning work we do for our clients, we include language in our documents that addresses the issue of divorce should it arise, allowing your plan to stay intact if you should fail to change your agent, Executor, Trustee and/or Personal Representative. We also consider the possibility of divorce when drafting asset protection trusts which helps to avoid some of the common issues that arise with estate planning and divorce.
But what should you do if your spouse suddenly needs long-term care, and you are faced with the prospect of losing a substantial amount of your assets to the costs of nursing home care?
For years divorce has been used as a Medicaid planning tool. If a couple divorces, the non-institutionalized spouse has no duty to contribute to the nursing home costs of the institutionalized spouse, and can keep the property awarded in the divorce judgment. The institutionalized spouse can qualify for Medicaid without considering the assets of the other spouse. With long-term care costs on the rise it is no surprise that many people use divorce as a planning tool to qualify for Medicaid.
Medicaid divorces happen more often in the following situations:
1. Second marriages;
2. When there are a lot of retirement assets; and/or
3. When there is a large disparity in wealth between the spouses.
Although divorce may seem to be a quick fix to an ultimately very expensive problem, there are some drawbacks. As is true with any divorce, a judge needs to grant the division of assets. What happens if a judge is unwilling to do so? Although you and your spouse may be in agreement as to the division of assets, a judge may see otherwise. What happens if one spouse is no longer competent? When competency is an issue, divorces become much more complex and require the appointment of a guardian ad litem (GAL). A GAL may not agree with the division of assets which would make it difficult to meet the desired outcome. See Divorce with Dementia.
You will want to consult with a trusted advisor to determine whether the Medicaid laws will allow you to keep sufficient income and assets to maintain your lifestyle, or whether a divorce is truly in both parties’ best interests. To learn more about the Medicaid rules, see How Much Money Can You Keep and Be Eligible for Medicaid Benefits?
If you have any questions about the issues presented above or care to discuss any other planning issues, please call us at 860-769-6938, visit our website at http://www.weatherby-associates.com or email us at info@weatherby-associates.com.
