Grey divorce is a growing trend that sees couples in their 50s, 60s and older end marriages that have often lasted decades. While the marital dissolution process is similar to younger couples, unique aspects exist with older soon-to-be ex-spouses, specifically when it comes to retirement assets.
Marital property as a whole represents earnings, purchases and acquisitions during a marriage. Exceptions include states that exempt gifts specifically given to a spouse.
Division of retirement accounts
Retirement accounts can take the form of the following:
- Individual retirement accounts (IRAs) – A long-term savings account where money is saved for the future while also providing some tax advantages. This option is particularly popular with self-employed workers who do not have access to workplace benefits.
- 401(k)s – Employer-sponsored retirement savings plans that see employees put aside part of their salary for future financial stability while benefiting from tax breaks.
IRAs are considered mainly easier to divide than any other retirement asset. The Internal Revenue Code (IRC) cites that a family court can approve orders in a divorce decree or marital property settlement agreement. Referred to as a “transfer incident to divorce.” it can also be included in a divorce decree or judgment.
Regardless of which spouse owns the account and sees it grow in value, it is still categorized as marital property. However, only the money earned during the marriage is considered joint property. Dividing accounts is challenging and subject to state and federal tax laws.
It is important to note that, should a prenuptial agreement be in place; it can trump state law. However, spouses can challenge the pact and legally pursue invalidation. More common cases include spouses under duress.