“Grey divorce” might be a relatively new term, but it looks like it’s one that’s here to stay. Used to describe people choosing to part ways in older age, there is an upward trend in couples divorcing once they’re “grey”. Reasons vary, but include having married later, facing increased longevity, retiring later in life or because of personal or professional shifts. Whatever the reason, splitting in the “silver” years is not always in a couple’s financial interests.
Of course, divorce at any age is likely to be emotionally taxing but splitting after a long-term marriage, and in your senior years, brings unique challenges. These can wreak havoc on well thought-out plans, particularly from an estate planning point of view. Read on for some tips that may help you protect your legacy, easing part of the financial burden of “grey divorce”.
Review Your Will
Revisiting a Will is advisable with each new life stage, but especially if the main beneficiary under a Will is a significant other. Comprehensive estate planning should also include reviewing the beneficiaries of assets that fall outside your estate, such as superannuation and any insurance policies you might hold.
You are likely to want to align your estate plan with the important relationships in your life. For example, whereas you may have previously nominated your ex-partner as the primary beneficiary of your estate, you might want to nominate new beneficiaries. Doing so will help to avoid legal issues, when the time comes. It also ensures that your assets will pass to the right people and that each party is clear on the assets they retain post-divorce.
In most Australian jurisdictions, a divorce does not automatically revoke a Will, but it does revoke any clauses that mention the ex-spouse. For example, if you have appointed your ex-spouse as an Executor or Trustee, those appointments will no longer apply, and new people will need to be appointed to those roles. Similarly, any gifts made out to an ex-spouse will be revoked. These automatic revocations may render the Will incomplete if it is not reviewed and updated after divorce proceedings.
Managing Family Trusts
You and your partner may have established a family trust at some stage during your marriage, with the intention of passing assets onto children or grandchildren. Divorce proceedings should prompt the winding up of any trusts and the redistribution of any assets. It’s also a good idea to seek financial advice as to whether you should establish your own family trust to hold some of the assets. The viability of this option is likely to depend on your financial situation.
Protecting your Legacy in a Blended Family
Blended families normally involve a party who remarries or plans to do so after a divorce. This scenario raises the need to consider how they wish to provide for different members of both the families they are connected to. The partner who remarries is likely to update their estate plan to include provisions for their new partner, while also leaving something for the children from their previous marriage. There is also the option of providing a “life interest” in the estate or part of the estate (such as a primary residence of the couple) for the new partner, meaning the estate assets will be held in trust for their benefit. It’s vitally important to consider how property is owned by a couple when it comes to protecting your legacy in a blended family.
Confirming New Enduring Powers of Attorney
It’s likely that Enduring Powers of Attorney (EPAs) are already in place for older couples, meaning that each has named the other as the person responsible for managing the other’s financial affairs in the event someone in the partnership loses capacity. A new person or people will need to be named in the lead-up to or following a divorce. If there is no suitable person to be appointed, an independent trustee company can fill this role as a financial attorney.
Keep Clear Lines of Communication
Communicating the changes in Wills and overall estate plans to family members can help reduce potential family conflict and heartache during the divorce process, as well as in the aftermath. Finding a way to keep everyone informed of each party’s intentions, without generating further angst, will make for a smoother administration of the estate down the track. To put it simply - the less conflict, the better.
Take a Proactive Approach
Given the potential additional complexities of grey divorces, it’s best to take a proactive approach when it comes to estate planning - don’t wait for problems to arise. Keep the lines of communication open with your family or families. Consider performing a regular financial audit of assets and income at each stage of your separation and divorce. Take charge of managing your finances responsibly. Doing these things will put yourself in good stead to protect your legacy, whatever challenges your relationships may bring.
Estate planning should be viewed as a dynamic process. The break up of a marriage later in life leaves potential for a lack of clarity around your end-of-life intentions. To give yourself the best chance of minimising the turmoil, update your Will, review your Powers of Attorney, and try to be open with your family.
Willed includes unlimited updates to your legal Will for the first 12 months. So, if you are going through divorce, consider writing your new Will today. Get started at willed.com.au
Disclaimer: The content of this blog is intended to provide a general guide to the subject matter. This blog should not be relied upon as legal, financial, accounting or tax advice.