Insights
Periodic insights from our Investment and Private Client Teams on a broad range of investment and advice-related topics
Published by the Private Client Team at KJ Harrison Investors
The breakdown of a marital relationship is difficult at any time, but it’s arguably more difficult late in life. After decades of being together, the loss of a relationship can be extremely disorienting for both partners. When a so-called “grey divorce” occurs, lifestyles, goals and family dynamics suddenly change, often leading to a profound sense of loss. Dreams of sailing off into the sunset of retirement together evaporate overnight, and, for many grey divorcees, it can be hard to adapt to change.
Yet there are other, more positive experiences for at least some of these “silver separators.” In my own work advising high-net-worth families, I have encountered many older clients, including women, who see their marital breakdown as the beginning of an exciting new phase in their lives. They come to cherish their independence, their freedom to pursue their own goals, and the opportunity to re-create their identities and find a new path.
What makes the difference? Just as every marriage is unique, so is every marital breakdown, and the factors that determine a “bad” or a “successful” divorce—these terms are relative—are clearly numerous and complex. But in my experience working with families, one element seems to be common to those who thrive despite—or sometimes because of—a grey divorce: they understand their new financial situation and have taken steps to manage their wealth effectively. That means being proactive, not just reactive, to the possibility of a late-life marriage breakdown, by being involved in wealth planning and working closely with a qualified and experienced wealth advisor.
The reality is, even if you think your marriage will last forever, late-life divorce is an increasingly common reality. In the U.S., more than a third of people getting divorced are over 50, and the divorce rate among adults over 65 has tripled over the last 30 years or so. A similar trend has taken hold in Canada, where the average age of divorce has been rising steadily, hitting 48 years in 2020.
Divorce is many things: a change, a life event, a disruption, an end and a new beginning. But it does not have to be a financial disaster, even when it occurs late in life
The factors driving grey divorce include the simple fact that people are living longer; with increased life expectancy, more people are deciding they do not wish to stay in a less-than-fulfilling marriage. Meanwhile, societal attitudes towards divorce have changed, reducing much of the stigma it used to attract, and many grey divorces occur among people who are already in their second (or third) marriage—statistics show that subsequent marriages tend to be less stable than first ones. As well, women today generally enjoy greater financial independence and career opportunities than they did three decades ago, and it is often the woman in a marriage who initiates a late-life
divorce.
So, grey divorce is becoming more common, but that is not to say it is easy. At its worst, it can have severe, detrimental emotional and psychological effects, as well as financial ones. Often, both partners experience a significant decline in their wealth, and the process of negotiating a breakup can be made even more complicated by the intertwining of assets and business interests created over decades of marriage. Legal fees, housing, support payments—all of these can have a quick and impactful effect on a couple’s financial health.
Across the general population, women tend to experience these adverse effects more severely than men, but that is not always the case. Especially for wealthy couples, a divorce settlement can be a source of newfound wealth and income for women. Even in those cases, however, preparation, planning and consultation with a wealth advisor can make all the difference.
Here are few things to think about from a financial perspective:
Assess your future income and expenses
A late-life divorce necessitates revising your projections for your income. With the division of assets arising from a divorce, the expected returns from those assets will change. (For high-net-worth couples, this often creates a net positive for the woman in the relationship.) Any spousal or child support payments—not just the amount but their duration—need to be taken into account. A change in marital status can also affect government retirement benefits like the Canada Pension Plan. On the flipside, consider how divorce will affect your expenses. Housing (including maintenance and taxes) is typically the most important consideration here, but so, too, are food, clothing, health insurance and transportation.
Understand your asset mix
Divorcing late in life can get complicated quickly, and nowhere more so than in the division of assets. Typically, your lawyer will manage the negotiations around assets, but it behooves you to consult with your wealth advisor and perform a thorough inventory of each and every asset in the household, including any separate or personal assets such as trust funds and inheritances. Consider, too, what your share of retirement assets like pensions, registered retirement savings plans (RRSPs) and Tax-Free Savings Accounts (TFSAs) is, as these will be vital to your new financial roadmap.
Revisit your retirement goals
Divorcing late in life often means changing your goals for the rest of your life just as you are contemplating—or already in—retirement. To navigate those changes effectively, you need to re-evaluate your retirement goals, plan and budget.
Renovate your estate plan
After a divorce, your estate plan should be updated immediately to reflect not only your new marital status, but also your own wishes as a newly single person. As appropriate, reconsider and redefine your designated powers of attorney for care and property, as well as your beneficiaries. One other issue to consider: a divorce can often affect inheritances for children. If that’s the case, make sure you communicate with them and level-set their expectations.
Don’t forget about insurance
In a marriage, health, life, disability and long-term care insurance are often provided by the one main income-earner in the relationship. When that relationship dissolves, the other spouse may be left on their own. So, consider your insurance needs and make sure they are adequate to meet your goals and protect you later in life.
Commit to taking charge of your finances
Often, one partner in a marriage (in my experience it’s often the man) “looks after” the couple’s finances, while the other partner is not involved in financial conversations, sometimes for decades. For many of the women I work with, a late-life divorce is an opportunity to rectify that imbalance and set their own financial course. Especially for those who are now in control of substantial personal wealth after a divorce settlement, taking charge of their financial future can be an enormously freeing experience—a way to ask the question “What do I want to do with my life?” (sometimes for the first time in years) and to come up with actionable answers.
Divorce is many things: a change, a life event, a disruption, an end and a new beginning. But it does not have to be a financial disaster, even when it occurs late in life. Whether you are contemplating or going through a late-life marital breakdown or just want to be prepared for the possibility, working with a qualified wealth advisor can help you not only know where you stand, but also define where you want to go.
