While divorce rates among younger adults are declining, the so-called “gray divorce” is on the rise. Couples over 50 are increasingly splitting up, often for the same reasons as younger couples, but framed by the unique challenges of aging and realizing they have more years behind them than ahead.
The Impact of Gray Divorce
Divorcing later in life poses unique financial challenges. One significant difference is that there is less time to recover financially. Statistics from the Pew Research Center show that since the 1990s, the divorce rate for adults 50 and older in the U.S. has roughly doubled. For those 65 and older, the rate has tripled over the same period.
Several factors contribute to this trend, including increased societal acceptance of divorce and unresolvable issues surfacing during retirement. Regardless of the reasons, gray divorce can be uniquely challenging, particularly concerning housing and real property.
Financial Considerations in Gray Divorce
Dividing marital assets during divorce involves more than just market value; future utility and benefits are crucial, especially for seniors. For instance, retaining the marital home can offer various long-term benefits.
Housing Benefits for Seniors
- Property Tax Exemptions: Many states offer tax exemptions for senior citizens, often based on age, residency, and income. Some areas defer taxes until the property is sold. Check with your local department of revenue for details.
- Homestead Exemption: If a home is a primary residence, a homestead exemption may protect a portion of its value from taxes, either as a flat amount or a percentage.
- Reverse Mortgage Eligibility: At age 62, homeowners can access a reverse mortgage, providing a potential income stream.
- Public Benefits: Primary residences receive favorable treatment for public benefits like Medicaid.
- Tax Deductions: Mortgage interest and property tax deductions, as well as exclusions from capital gains upon sale, can be significant.
- Rental Income: Homeownership can also offer rental income opportunities, either by renting out part of the home or the entire property if the owner moves elsewhere.
- Home Equity: Accessing home equity can be challenging with limited income, but it remains a valuable asset.
Financial Strain of Gray Divorce
Divorce halves your wealth and doubles your expenses, with separate residences and increased bills. Women over 50 may see their standard of living drop by 45%, and men by 21%. Often, the marital home must be sold, with proceeds divided, posing further financial strain.
Overcoming Mortgage Hurdles
Divorcing seniors often face lower incomes, making mortgage financing challenging. Working with a Certified Divorce Lending Professional (CDLP®) can help identify opportunities for staying in the marital home or purchasing a new one.
Benefits of Working with a CDLP®
- Identify Qualified Income Sources: A CDLP® can help the retaining spouse qualify for an equity buy-out refinance or develop a plan for future mortgage financing.
- Assist the Vacating Spouse: They can ensure a court-ordered assignment of debt and proper settlement agreement verbiage to exclude existing debt from the vacating spouse’s new purchase mortgage.
- Facilitate Successful Negotiation: Effective communication and strategic negotiation ensure both parties come out of the divorce whole or on the path to recovery.
Contact a CDLP® Today
For more information on how divorce can impact your ability to obtain mortgage financing, contact a CDLP®. Their knowledge and experience can make the transition smoother and more successful for all parties involved.
Working with a CDLP® and incorporating Divorce Mortgage Planning into the settlement can help both spouses secure new mortgage financing post-divorce. Obtain a copy of the "Divorcing Your Mortgage Homeowner Workbook" to guide you through credit, real estate, and mortgage financing after divorce. This resource will help you get organized, prepare, and understand your mortgage financing position, whether you need to refinance the marital home in an Equity Buy-Out situation or prepare to sell and purchase a new home post-divorce.
This is for informational purposes only and not for the purpose of providing legal or tax advice. You should contact an attorney or tax professional to obtain legal and tax advice. Interest rates and fees are estimates provided for informational purposes only and are subject to market changes. This is not a commitment to lend. Rates change daily – call for current quotations. The information contained in this newsletter has been prepared by, or purchased from, an independent third party and is distributed for consumer education purposes.
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