The rate of divorce for couples over fifty years old is on the rise. In most cases, couples have been working and saving for years to retire at a reasonable age. Couples have probably thought together about their plans for how to handle their finances after retirement. Divorce at a late age often means a complete reconsideration of retirement plans. Moreover, long-term marriage can also mean that the economically disadvantaged spouse is more likely to receive an award of long-term spousal support. Continuing to make spousal support payments after retirement can be very challenging for the paying spouse. California courts have demonstrated a disinclination to force a retired spouse to continue making spousal support in some cases. This must be balanced against the receiving spouse’s inability to obtain employment that would make his or her standard of living reasonably comparable to what was enjoyed during the parties’ marriage.
One solution to this tension between one party’s need to retire and the other party’s continued need for financial support is a lump-sum alimony payment. Sometimes referred to as a “golden parachute,” this type of spousal support payment has significant differences from the typical monthly payment. As the name suggests, this type of alimony payment is paid all at once or in a couple of very large chunks. The advantage to this for the paying spouse is that often the lump sum is a smaller amount than he or she would have ended up paying by making monthly payments over a period of years. The advantage to the receiving spouse is that he or she has a larger set of financial resources immediately following the divorce in order to help transition into a new life, and a guarantee that a known amount of support will be received. A disadvantage to this can be the tax consequences. Spousal support is tax deductible to the paying spouse, and taxed as income to the receiving spouse. Accordingly, before accepting this type of offer, both spouses should consult with a financial advisor so that the best tax benefit for each spouse is taken into consideration.
Yet another alternative to avoid the complications that may come with retirement and spousal support is using an offset to the parties’ assets. California is a community property state, meaning that each spouse will receive half of the marital assets. In an offset situation, the couple could agree for one party to get a much larger share of the marital assets to off-set the amount of spousal support that he or she would have received. In other words, the paying spouse may walk away from the marriage with significantly fewer assets, but in exchange, there would be no spousal support obligation.
Silver divorce has special issues which consider careful consideration. We have helped our clients craft specialized spousal support agreements that meet their needs. Contact us today at 619-800-0384 for a consultation to talk about your divorce and your retirement.