Gray divorces are on the rise and reverse mortgages are
starting to play a role in how an estate is settled. In regards to gray divorces, a Bowling Green
University study found that the divorce rate among adults aged 50 and older
doubled between 1990 and 2010. You can read the study here: https://www.bgsu.edu/content/dam/BGSU/college-of-arts-and-sciences/NCFMR/documents/Lin/The-Gray-Divorce.pdf
But the good news is that overall, divorces are down.
I sat down with Katie Clunen, a family law attorney with Dion Law Group in
Westlake Village, California, and she advised me that there are several factors
that need to be weighed before a couple considers a senior citizen divorce.
Clunen tells her clients to first meet with a therapist to see if they can work on their marriage.
Second, she suggests the parties meet with a financial planner, preferably one
that has experience in divorce situations, or a wealth management advisor that
can run numbers for the parties to show what their income and assets would look
like in a divorce if one party stayed in the home and bought the other one out
or if the house was sold. I would also suggest the parties look into a reverse
mortgage as an additional option, which will be discussed below.
Division of assets is usually top of mind, but Clunen
pointed out that in a gray divorce there are unique issues. For example, when it comes to determining spousal support,
some of the factors considered are the marketable skills of the supported party and the age and health of the parties. Public policy provides that a supported
person shall be self-supporting within a reasonable period of time. However, if one of the parties is not able to
work because of being out of the workforce for many years or their age, a dispute can arise regarding the amount and duration of the spousal support.
The division of retirement benefits is also a hot point. Health
insurance and Medicare issues in particular.
Once a divorce is final, the person who pays for the medical insurance
does not have to continue paying for the ex- spouse’s health insurance. In fact, health insurance companies will
terminate the coverage to the ex- spouse. If a soon- to -be ex-spouse is ill or
has a pre-existing condition, this could play a major role on whether or not a
divorce is financially feasible for both parties. Also, financial stability or instability
issues, which again goes back to a person that may need to go back into the
workforce for the purpose of obtaining or paying for their health insurance if
they lose their coverage in a divorce.
Social Security benefits need to be considered since the
monthly benefit is calculated by age and when the beneficiaries select to start
receiving benefits. What if there’s a
gray divorce and the primary wage earner is working? Does the ex-spouse get Social Security
benefits right away if the other is still working? These questions need to be answered by a
Then there’s housing.
Does the family have two properties?
If so, it’s possible each spouse gets a property to live in. Hopefully
there’s enough monetary assets to run each household. But what if there aren’t two properties? Here’s a scenario: A married, retired 75-
year- old couple live in a property that is free and clear and worth $550,000. They are exploring the possibility of a senior
citizen divorce but if they sell the home each may possibly get $270,000 (not
including taxes and exemptions). They
don’t qualify for a home loan due to their income, and $270,000 isn’t enough to
buy a home outright and they don’t want to rent.
The reverse mortgage in this case is a gray divorce
solution. There is a reverse mortgage
for purchase loan option that is seldom talked about. The senior citizen puts a large down payment
say 45% on the new property they would like to purchase and there’s no payments
on the balance due on the loan. Qualifying for the loan is different than a regular
conventional or 203b FHA loan. It has the senior in mind.
That means that one spouse stays in the home and buys out
the other. The spouse buying out the
other applies for a reverse mortgage to get funds from their home equity, and
the soon- to- be ex-spouse takes the funds they receive and uses another reverse
mortgage for purchase loan for a large down payment and buys their next home and without monthly
To clarify the above situation, since both people used a
reverse mortgage for their transaction, neither of them have monthly payments
on the balance of their mortgages for the rest of their lives.
Clunen’s firm, the
Dion Law Group, has a unique refreshing litigation approach for divorce. It’s called limited scope representation.
This form of representation coaches the client on doing some of the simpler
things themselves, with the more difficult tasks handled by the attorney. The
client is billed only for the tasks where the attorney was needed. This keeps
costs down. However, if the client wants
full representation and doesn’t want to handle any part of the transaction, then
the Dion Law Office can do that as well.
It is important to
note that not all law offices offer limited scope representation and only
licensed attorneys, not paralegals, can give legal advice when it comes to
filling out court related documents or negotiating settlements.
Katie Clunen with the
Dion Law Group is located in Westlake Village, California. She can be reached at 805-497-7474 and her webpage is http://dionlawgroup.com/katiec.html.