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Meta Title :Top tips for ‘silver splitters’ and those remarrying in later years
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Apr 5, 2018, 08:30 AM
Article ID :116447
Divorce amongst the over-60s, often referred to as the 'silver' or 'grey' divorces, are on the increase according to recent data from the Office for National Statistics. Reasons cited for the dramatic increase in divorces later in life include longer life expectancy, greater financial independence of women, reduced stigma surrounding divorce, and greater presence of retirees on social media and online dating sites.
Letting go of the life you’ve built and lived together for often over 40 or 50 years can be fraught with anxiety and uncertainty and you may question how you will survive such a profound change in your life. You may even question whether the stress and complexity of a divorce is worth ending an unhappy relationship.
On the other hand, contrary to the general trend in declining numbers of couples tying the knot, the marriage rate for the over 65s has increased by 40-50% according to ONS statistics – so the growth in silver divorces appear to go hand in hand with people re-marrying later in life too.
Divorcing and remarrying later in life typically involves added legal complexities. To address some of these, we have set out some top tips and common pitfalls below, including:
Dividing assets on divorce after a long marriage - such as the family home, pensions, maintenance and tax planning.
Preparing for unforeseen circumstances - eg loss of capacity and wills.
Protecting your wealth on re-marriage - including prenuptial agreements and discretionary trusts.
Dividing assets on divorce after a long marriage
In England and Wales, the court has a wide discretion in the division of assets upon divorce. The starting point after a long marriage, where the wealth has been built up during the marriage, is a 50/50 split. However, there may be circumstances where the court departs from equality, eg where the housing needs of either party cannot be met from an equal division of the assets.
The family home– the family home is often the most valuable asset for division on divorce. There are many ways in which the court could deal with the family home, eg allowing one party to remain in the property if there are other assets available to buy out the other spouse’s interest. Unfortunately, where the family home is the only asset, it is often the case that it will need to be sold in order to allow both parties to re-house as many will not be able to raise a mortgage at the later stage of life. Where the family home is in the sole name of your spouse only, it is crucial to register your Matrimonial Home Rights with the Land Registry. This will provide you with protection as you will receive notice if your spouse attempts to re-mortgage or sell the property in order to frustrate your claims. If the family home is jointly owned, you can discover from the Land Registry records whether you and your spouse own the property as beneficial joint tenants or tenants in common. If the former, this means that in the event of your death, your surviving spouse will automatically inherit your share. The converse is also true on your partner’s death. To prevent the operation of this rule, the joint tenancy needs to be severed.
Pensions– According to new research from Prudential, divorcees who plan to retire in 2018 can expect their annual income to drop by £3,800 compared to those who have never divorced. Make sure you understand the full value of your pension or any pension claims that you are losing as a result of the divorce. The latter is important if you gave up your career and lost the ability to build up the same pension pot as your spouse. The courts have extensive powers to deal with pensions upon divorce. One option (and the most common) is by way of a pension sharing order; the order will state what percentage of your spouse’s pension pot you will receive. This share will be removed from the pension and placed into a pension in your sole name (some providers allow for internal pension transfers so that you can keep your pot within the same scheme). The advantage of a pension sharing order is that you may do with your share as you please. The other less common option is a pension attachment order which allows you to receive part of the pension income when your spouse receives it upon retirement. To add to the complexities, the pension value on the face of it may not reflect its true value. Pensions are a difficult area and you may need to consider whether a pension expert should be appointed to determine its real value and to advise on the various options.
Maintenance– In addition to claims for capital, which includes property, lump sums and pensions, the courts can also order one party to a marriage to pay the other a regular monthly amount in order to meet the day to day expenses. The amount payable will depend on both party’s income budget (ie what you need every month going forward), the level of income that you both enjoy (including earning potential). If there is a shortfall, you will be seeking spousal maintenance from your partner in most cases (if the income is available) particularly after a long marriage. The court will not only decide the quantum of the maintenance but the time period over which the maintenance should be paid. The court could order a 'joint lives order' which will essentially continue until the death of either party, or the remarriage of the payee, whichever is the earlier. In a long marriage, where one party has not worked for a significant period of time and has no earning capacity as they are approaching retirement age, it is likely that the courts will order maintenance for life providing that there is not sufficient capital to provide a lump sum in lieu of the maintenance.
Tax planning- We encourage our clients to speak to an Independent Financial Adviser (IFA), who can help with tax planning early on in the proceedings. Assets transferred in the financial year of separation between spouses are exempt from capital gains tax. This may be an urgent issue to consider even before you finalise the settlement. Of course, it is in both parties’ interest to minimise the tax liabilities. See also Kingsley Napley's blog on this topic, “Tax and divorce – if not now, when?”
Preparing for unforeseen circumstances
Loss of capacity – this can happen at any stage of life through accident or illness, however the probability of it occurring increases as you get older. If you have started divorce proceedings or financial remedy proceedings (which deals with the division of the finances upon divorce), it is important to consider who should step in as your litigation friend in the event that you lose capacity to provide instructions to your solicitors. Your divorce case cannot proceed until you have someone (other than your solicitor) acting on your behalf. Ensure that you speak to the nominated party before passing the details to your solicitor as they need to be willing to undertake such a task (which your children and mutual friends may not feel comfortable in accepting). The duties on a litigation friend can be cumbersome and stressful, particularly if your case is complex.
Will –it is important to get a holding will whilst you are going through the divorce process. If you were to die without a will, the intestacy rules will kick-in. This would mean that your spouse would automatically inherit: i) the first £250,000 of the estate; ii) all your personal property and belongings; and iii) half of the remaining estate with the other half split between your surviving children. If there are no surviving children, grandchildren or great grandchildren, your spouse will inherit your entire estate. This is irrespective of the fact that you may be separated.
Protecting your wealth on re-marriage
There is much to be said for marrying a second time at a later stage of life. You learn from your mistakes, know what you want and don’t have the pressures like you did the first time round, raising children being one of them.
But ahead of booking the registry office, it is important that you consider a prenuptial agreement as a future marriage breakdown could significantly impact your financial position and any commitments you may have to children from a previous marriage for instance.
Prenuptial agreements- whilst prenuptial agreements are currently not legally binding in England, they are one of the circumstances which the court will take into consideration. The courts increasingly uphold such agreements to protect pre-marital wealth where it can be shown that the needs of the parties are met. Even if you are only cohabiting for the time being, think about getting a cohabitation agreement drafted which will protect your property.
Discretionary trustsare often used in inheritance planning but they can also play a role in asset protection. Consider placing assets into a discretionary trust in order to provide for the children from your first marriage and future generations. This is a complex area of law and it is therefore advisable to seek legal advice on the level of protection it can afford during a divorce. This will very much depend on when the trust was set up (ideally before marriage) and the true purpose of the trust. It is very difficult to argue that the trust should be completely disregarded if you are entitled to receive income and/or capital from the trust.