A “Gray Divorce” refers to a couple over the age of 50 ending a long-term marriage. This type of divorce has become more common in recent years. Unlike a common divorce case where the focus is typically on the custody of the parties' children, the focus of a gray divorce is on the division of retirement assets, pensions, social security benefits and future healthcare coverage planning. With retirement nearing and likely more assets to divide, the stakes of asset division in these cases can be much higher than a typical divorce.
How are Retirement Assets Divided in a Gray Divorce
Retirement assets earned during a marriage are typically martial property and often are the largest marital asset for older couples. Any pre-marital contributions which are funds or service credit earned in a retirement account before the marriage date are separate property and are not subject to distribution. The most common retirement assets in gray divorces are:
· 401(k) and 403(b) plans: Contributions made during marriage are divisible; requires a Qualified Domestic Relations Order (QDRO) which is a court order that instructs a retirement plan administrator to pay a portion of benefits to a former spouse. Without a properly drafted QDRO, the transfer may be treated as a taxable distribution.
· Traditional and Roth IRAs: Can be divided through a transfer incident to divorce without early withdrawal penalties, which moves a specified portion of an IRA directly from one spouse's account to an IRA in the other spouse's name.
· Pensions: are subject to equitable distribution but only the portion of the pension earned during the is subject to division. Any pension credits earned before marriage or after the divorce filing date remain the separate property.
· Social Security: if the marriage lasted at least 10 years and you're unmarried, you can claim Social Security spousal benefits based on your ex-spouse’s work record.
How is an Asset Like the Family Home Divided
The family home is often one of the most significant assets in a gray divorce. If one spouse wants to keep the home, they may need to buy out the other spouse’s share. However, keeping the home may not always be financially feasible, especially for the spouse with less income or retirement savings. Selling the home and splitting the proceeds is another option. When deciding what to do with the home, divorcing spouses must consider the emotional and financial implications. Equitable distribution laws will apply to the home’s value, taking into account contributions made by each spouse.
Healthcare Plan Implications
A spouse covered under the other spouse’s employer health plan loses that coverage once the divorce is final. COBRA can extend the same coverage for up to 36 months, but at the full premium cost often much more than what was being paid as a dependent on the plan. If you're within a few years of Medicare eligibility at 65, the real question is how to bridge that specific gap: COBRA, a marketplace plan, or new employment coverage.
Spousal Maintenance
Spousal support is a frequent concern in gray divorces, especially in cases where one spouse has been out of the workforce for years. Courts consider several factors when determining maintenance, including the length of the marriage, each spouse’s age, health, earning capacity, and whether one spouse sacrificed career opportunities to support the other or to raise children. Older individuals may be less likely to reenter the workforce or retrain, making maintenance more critical for financial stability. Unlike in shorter marriages, courts may award permanent or long-term support if it’s deemed necessary for the dependent spouse.