According to the United States Census Bureau, overall national divorce rates have decreased in recent decades. But about 10 percent of couples don't make it to their fifth anniversary and about 25 percent call it quits before their tenth anniversary.
Not all rates have declined. The Wall Street Journal reported a surge in the rates for "gray divorce" -- breakups by people over age 50. "Their rate has doubled over the past two decades," the paper notes. And for many of them, "it is not their first marital split. Fifty-three percent of the people over 50 now getting divorced have done so at least once before. Having been married previously doubles the risk of divorce for those ages 50 to 64. For those ages 65 and up, the risk factor quadruples."
To add to their troubles, my experience is that most couples opting for divorces -- whether early or late in life -- fail to foresee that their breakups require them to deal with many complex financial problems in today's troubled economic times, and they have competing interests. The Wall Street Journal cautions that "This is especially true of women."
What follows are simple steps that divorcing spouses should take to protect themselves financially. They also are smart practices for spouses who remain married and individuals in all stages of relationships.
Educate yourself for financial planning. It's vital that you assume greater responsibility for your financial future. Don't rely exclusively on paid advisers. At the very least, become knowledgeable enough to raise good questions and evaluate answers when dealing with divorce attorneys and other professionals. The informed client gets the best advice.
A quick, low-cost way to become savvy is to sign up for adult education courses on taxes, investing and other aspects of personal finance. Select from an array of classes tailored to your interest that are available at places like high schools and community colleges. Courses cost a fraction of what it would otherwise cost to meet on a one-to-one basis with instructors, who usually are attorneys, CPAs and financial planners. Instructors use their hands-on experience to provide helpful, unbiased advice on topics that run the gamut from getting married or divorced, to timing the receipt of income and the payment of deductions to your best advantage.
These courses alert you to money-saving techniques that you can apply yourself or, should you decide to seek professional help, test out on your advisers. And, conceivably, those advisers might turn out to be your instructors, whom you've had an excellent chance to evaluate.
Beware of seminars for seniors. Be wary of retirement planning services and estate planners who send invitations to free lunch seminars geared to seniors. An AARP survey of more than 1,000 people 55 and over found that many who attended seminars on retirement and estate planning were "pitched investments that were unsuitable for them or were asked for information that could expose them to financial fraud."
The invitations consistently offer the same enticements: "A free gourmet meal, tips on how to earn excellent returns on your investments, eliminate market risk, grow your retirement funds, and spouses are urged to attend. These words should be red flags for investors," cautions the North American Securities Administrators Association on its web site. (NASAA is an international organization devoted to investor protection.)
Update beneficiary designations for insurance policies and retirement plans. Otherwise, proceeds might wind up with a former spouse or someone you now consider unworthy.
Prepare a will or make sure an existing will is up-to-date. Redo your will if you've divorced, legally separated or married since you wrote it. Your property intentions normally change when your marriage ends. And a remarriage also increases the complications, particularly when each spouse has children from previous marriages.
When you die without a will, your assets pass in accordance with your state's intestacy laws. The absence of a will often means that your estate will be burdened with unnecessary administrative expenses and taxes.
Prepare a letter of final instructions. Checked beneficiary designations and written your will? Good for you. Also prepare a letter of instructions. This is the legal term for an informal document in which, among other things, you list the location of your important personal papers and assets.
Your heirs need to know what your assets are -- traditional or Roth IRAs, 401(k)s and other retirement plans from your employer or your business, insurance policies, bank accounts, mutual funds, brokerage accounts and other holdings like real estate, jewelry or art works. They need to know where they are and how to dispose of them. Keep the letter up-to-date and accessible.
---------------------------------------------------------------------------------------------------------------------------------
Julian Block is an attorney and author based in Larchmont, N.Y. He has been cited as: "a leading tax professional" (New York Times); "an accomplished writer on taxes" (Wall Street Journal); and "an authority on tax planning" (Financial Planning Magazine). Information about his books is at julianblocktaxexpert.com.