Properly Dividing Assets Can Be Difficult During CA Gray Divorces
Under California’s community property laws, correctly dividing complex assets, such as retirement accounts or commingled property, can be challenging.
"Gray divorce," or divorce after the age of 50, is becoming increasingly common in Newport Beach. According to USA Today, in 2010, one-quarter of recently divorced spouses belonged to this age group. To some people, these divorces may seem fairly straightforward, since spouses don't have to address divisive issues such as child custody. Still, gray divorces aren't always free of complications.
Spouses often face unusual issues or considerations when dividing assets and debts during gray divorce. Older adults usually have accumulated more valuable and complex property, which can make asset valuation more difficult. Many spouses may not understand how these assets should be divided. Additionally, the financial ramifications of a poor settlement may be especially severe for older spouses.
Unique financial concerns
Gray divorce can be financially devastating because older spouses have limited time to rebuild their savings. After a gray divorce, many spouses must postpone retirement, resume working or downgrade their retirement plans. These changes still may not offset the increased costs of retiring alone. According to some financial planners, two retirements may cost 30 to 50 percent more than a joint retirement.
The financial challenges inherent to divorcing shortly before retirement make reaching a fair division of property critical. Unfortunately, many spouses may overlook marital assets or misunderstand their legal rights. Others may delay making financial decisions or decide not to fight for their share of assets, according to The New York Times. Sadly, these oversights or decisions may prove costly in the long run.
Property division guidelines
Spouses who are preparing for gray divorces can benefit from understanding their rights. In California, most property is classified as separate or community property. Separate property is property that spouses owned prior to marrying. Gifts, inheritances and proceeds from separate property also qualify as separate property. All other property obtained during marriage is community property. The following assets may be considered community property:
- Physical property, such as houses and vehicles
- Bank accounts, stocks and cash
- Retirement accounts, including pension plans and 401(k)s
- Businesses and patents
When property is distributed during divorce, separate property remains with the spouse who owns it. In California, community property is divided equally between spouses. Although this may seem straightforward, property division can become complicated when spouses own complex or substantial assets.
Some types of community property, such as pension plans, can only be divided through a qualified domestic relations order. This is a legal order that changes ownership of a retirement plan so that each spouse can receive a share. These orders are technically complex, and errors in preparation can have significant financial consequences.
Correctly dividing property can also be challenging when separate and community property have mixed into commingled property. This mixing may occur under various circumstances. For example, if a spouse contributed to the same retirement plan before and during marriage, the plan is a commingled asset. Spouses usually must seek professional advice to determine how to divide these assets.
Given the unusual concerns that gray divorce can introduce, spouses who are preparing for one may benefit from working with an attorney. An attorney may be able to help a spouse understand his or her rights and minimize costly oversights during the settlement process.
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