You may have heard the term “Gray Divorce” recently. Gray divorces are on the rise in recent years, particularly in the Sunshine State. A Gray Divorce most commonly refers to older couples (usually age 50 or older) divorcing after several decades of marriage.
Some reasons Gray Divorce is becoming more popular include longer lifespans, women more often having more financial independence, and empty nester syndrome. Another big reason is there is now less social stigma attached to divorce.
Gray Divorce comes with some added considerations, which may not be part of a divorce involving younger generations; alimony being on of those. Florida eliminated permanent alimony in 2023, however, in a long term marriage (20 years or more) long term durational alimony can provide for a duration of up to 75% of the length of marriage and up to 35% of the difference in the spouse’s incomes.
Retirement accounts are typically the largest asset to divide in a Gray Divorce. Any retirement assets accumulated during the marriage are considered marital property to be equitably divided. Unless there are enough other assets to avoid having to split a retirement down the middle, then a QDRO may be required in order to properly divide those retirement assets. Specifically, division of retirement assets depends on the type or retirement:
Different Types of Retirements have Different Rules:
401(k) and 401(b) plans must be divided by a QDRO. This enables the receiving spouse to roll their portion into their own IRA, without any tax consequences.
Traditional and Roth IRAs can be divided by a “Transfer Incident to Divorce” under the IRS Rules, through a trustee-to-trustee transfer directed by the divorce decree.
Military Retirement is governed by federal law under the Uniformed Services Former Spouses Protection Act.
Defined-benefit pensions require an actuarial valuation or a coverture-fraction approach as well as a QDRO.
Florida Retirement System (FRS) pensions have their own plan-specific orders under Chapter 121.
In a marriage lasting over 10 years, a spouse may qualify for Social Security benefits, based on their ex-spouse’s earnings record. A spouse can be entitled to up to 50% of the ex-spouse’s benefit, if claimed at full retirement age (although the benefit can be claimed as early as age 62).
Health Insurance and Medicare may be an extra consideration. For those younger than 65, once the divorce is final, a party can no longer qualify as a “spouse” under their former spouse’s employer health plan. However, divorce is a qualifying event under federal law, giving the non-employee spouse up to three years of continued coverage under the same group health plan (however the non-employee may pay up to 102% of the group rate to continue). Another possible avenue is ACA Marketplace coverage. Divorce triggers a 60-day Special Enrollment Period to buy health insurance through the Marketplace, with subsidies based upon the party’s post-divorce income.
For those 65 or older, Medicare will not be affected by the divorce as it is individual coverage. If a party did not work enough quarters to qualify for premium-free Medicare coverage alone, then they may still qualify based upon the former-spouse’s work record, if the marriage was 10 years or more in length and the other former-spouse worked at least 40 quarters in a Medicare-taxed job.
There are a lot of extra considerations in a Gray Divorce. Make sure you keep each of these in mind when consulting with an attorney. Cody Law can help you navigate these issues and more. Reach out to our office to set up a consultation.