The Specificities of Grey Divorces in Mediation

In our previous blog, we focused on why would a couple who have lived together for so many years want to divorce in their later years. In this blog, we want to share with you the issues that are specific to grey divorces and how we mediation them.

1). The House

The spouse who will retain the house may have an advantage in the future for the following reasons:

1.1). The “family home” has in all likelihood appreciated over the course of the marriage especially, if the property is located in a sought-after neighborhood (top-rated public schools, close to public transportation and/or big companies). As a result, this home may continue to appreciate at a faster rate than can be realized from investing in stocks;

1.2). The spouse who keeps the house may qualify for the yearly homeowner's exemption if he/she resides on the property;

1.3). The spouse keeping the house will have access to equity in the home if he/she chooses to sell or downsize;

1.4). The spouse keeping the house may benefit from the provisions of California Propositions 60 and 90 which allow a person who is over age 55 to sell his/her principal place of residence and transfer its base year property tax value to a replacement dwelling of equal or lesser value;

1.5). The spouse retaining the home may qualify at age 62 for a reverse mortgage which would give him/her a stream of income;

1.6). The spouse retaining the home may be able to qualify more easily for Medi-Cal because he/she owns a house which is considered an “exempt asset” rather than a spouse who has stocks and bonds which are not considered exempt assets;

1.7). The spouse retaining the house may be able to deduct mortgage interest on his/her taxes. If he/she is living in the home for 2 of the last 5 years prior to selling it he/she would qualify for a $250,000 tax exclusion;

1.8). The spouse owning a home always has the option of renting a room (or the entire house) to receive rental incomes.

2). Health concern

In grey divorces, any serious health issue affecting one of the spouses will become an important point of discussion when dividing the couple's assets to make sure that the spouse with the illness will be able to be treated and taking care of properly in the future.

For example, in one of the grey divorce cases, we dealt with the husband who had a serious health condition that, at one point, was going to require him to be in a skilled nursing facility. The couple had been married for decades and had one child together. As a result, during the mediation, it was decided that:

The house would be allocated to the husband and all of the other cash assets would be allocated to the wife.

When the husband's condition will required skilled nursing assistance, he will gift the house to their son to qualify for Medi-Cal.

As a side note, if one of the spouses has a mental condition (Alzheimer’s, dementia, etc.), it may be appropriate for a conservator to be appointed by the Court to facilitate the division of assets to occur.

3). Spousal support

Another key consideration in grey divorces is the alimony AKA spousal support. One spouse may need to receive spousal support especially if he/she is unable to work and/or does not have sufficient assets to live on.

One of the most common alimony requests in grey divorces has to do with medical expenses. If both spouses are covered for medical insurance due to the employment of one spouse and there is a divorce, the question of how the non-employee spouse is going to cover his/her health care costs until he/she qualifies for Medicare must be discussed during the mediation.

4). Long-term care insurance

Not all grey couples who have long-term care insurance policies each have their own policy. Therefore, in the event of a divorce one spouse may end up with no long-term care insurance.

Also, many grey couples who have waited to purchase long-term care insurance find the cost to be very expensive. As a result, most grey couples deal with this by only purchasing one long-term care insurance usually on the wife for the following reasons: the husband may be older, the husband may statistically die before the wife, and the husband is the spouse who worked longer. In this configuration, if the husband becomes ill, the wife will provide care for him. But once the husband dies and the wife is alone, there is no one left to provide care for her.

If the couple now divorces, the questions that arise are: how will the wife continue to pay the yearly premiums on the policy? If the husband becomes ill, who will care for him? This is why it is so important that long-term care insurance becomes part of the discussion during grey divorce mediation.

5). How do we mediate a grey divorce at Mediation Path Silicon Valley?

Below is a list of the information we gather before mediating a grey divorce.

5.1). Determine the couple's living expenses: Having a good idea of how much they each will need to live after the divorce will help the grey couple decide which assets would best meet their income need.

5.2). Diversification: One or both spouses may have investments in several stocks. They should consider taking their share of the estate as a percentage of each stock, rather than all of one stock. Investments should be diversified, if doable so that if one stock does not perform as anticipated, the other stocks might.

5.3). Tax consequences: In dividing assets in a divorce, any couple needs to understand the tax implications of each asset. In grey divorces reducing an asset’s value in the property division to account for likely tax consequences may be appropriate, but this is only going to happen if the parties are aware of the tax laws.

5.4). Creating income - When grey couples are dividing their assets, we recommend that each spouse evaluate their need for income from rent or dividends and consider dividing the assets in such a way that the spouse needing income will receive assets that generate revenues.

To conclude there are many specificities in grey divorces, that we at Mediation Path Silicon Valley, are accustomed to dealing with. Therefore, if you or someone you know is considering a grey divorce feel free to contact us and see how we can help.