Baby Boomers are the generation most prone to divorce, with 40% of them having already divorced as of 2010. The net worth of those going through what is often called gray divorce, silver, or even diamond divorce is generally higher.
They’ve been married for 20 to 30 years and are likely to have much more assets than younger couples, including real estate, retirement, social security benefits, and possibly larger savings accounts.
They are part of the generations that have also been more exposed to divorce. This experience, along with twenty-first-century technical advancements, positions the ordinary divorcing spouse to have a significantly better breakup than previous generations—basically, a separation that guarantees bigger bank accounts and undamaged personal integrity.
Yet, how does divorce impact a person’s perceived wealth? This refers to the generalized cognitive bias that people with liabilities that are equal to or outweigh their business assets feel and are considered wealthier when they have greater assets and spend more, despite having larger debt.
Perceived wealth looks only at the material assets, and it can add to the concern about the loss created by a divorce. Actual wealth is a more accurate reflection because it excludes the costs of acquiring that wealth.
In the end, divorce can be taxing, emotionally traumatic, and just plain messy, even for this generation. Academic research shows that there are substantial health consequences.
Adults who have recently separated or divorced have greater resting blood pressure, according to a University of Arizona study. In addition, a German study discovered that divorce resulted in a significant weight increase over time, especially in men. In addition, splitting up after the age of 50 can be especially harmful to one’s emotional and financial well-being, even more so than splitting up at an earlier age.
Taking a Look at Assets During High-Net-Worth Divorce
Items with a monetary value, whether tangible or intangible, are considered assets. This means that a divorcing couple can cash in their assets by selling them, cashing out insurance, or withdrawing funds from an account. Some examples of assets are:
- Real estate, which includes land and buildings linked with it (such as a home, land, or a commercial investment structure they own).
- Personal property that refers to everything people own that isn’t real estate (such as family heirlooms, furniture, artwork, appliances, jewelry, cars and trucks, boats, and recreational vehicles).
- Assets in the form of money or cash equivalents (such as savings or checking accounts).
- Life insurance, 401(k), and other retirement plans, annuities, stocks, and bonds are all examples of investments, other types of assets.
A Short Glance on Debts
A monetary obligation owed to someone else is referred to as a debt. Debts that high-net-worth divorcing couples may be dealing with individually or as a couple include:
- Mortgages for residential, investment, and commercial properties.
- Automobile, leisure vehicle, and watercraft loans.
- Credit cards that are examples of revolving debt.
The spouses will have to work out what to do with whatever debt they have together during their high-net-worth divorce. As a result, it’s critical to know how credit and debt conditions present themselves before, during, and after the divorce so they can plan accordingly.
The Valuation and Division of Assets
Before assigning assets and debts during divorce, spouses should make sure they understand what belongs to them personally and what belongs to the community property.
Because they are forced to list everything, this can be stressful and overwhelming. People going through a high-net-worth divorce have more complex assets. Various sorts of retirement accounts, real estate, established company interests, savings accounts, and assets held in more unusual sources (such as art and high-fashion collections, boats, investments, jewelry) can all be included.
Not everyone has these assets in order, and if couples have been dealing with the emotional implications of navigating a divorce, it’s fair to assume some matters might have been pushed to the back burner.
Each of the assets must be accurately valued, which may entail hiring an expert, taking into account any tax consequences of liquidation, division, or transfer of those assets, and adequately transferring or paying out those assets to the spouse to whom they have been awarded.
Before dividing these assets, divorcing spouses should make sure they have properly consulted with an expert.
Perceived Wealth vs. Actual Wealth
Divorce tends to bring out the worst qualities in individuals. Some people consider divorce a chance to exact vengeance on a spouse by seizing the assets and money.
People frequently want to vent their frustrations on their ex-spouses, and they can try to deceive them by hiding or concealing assets, but they forget that they’re also breaking the law. If the truth about what they’re hiding is out, they’ll lose their credibility in court and be forced to support harsh consequences, including monetary fines.
Spouses do try to find ways to game the system because the reality is that being involved in a divorce, especially in a gray divorce, might be a significant financial shock. Such a procedure consists in sharing a family’s assets. People who divorce beyond the age of 50 may anticipate their wealth to collapse by roughly 50%, according to a study that looked at a long-running longitudinal poll of 20,000 Americans born before 1960.
Income plummets after a gray divorce, especially for women. The study looked at the cost of living and found that when they divorce after the age of 50, women’s standard of life plummets by 45 percent. That’s about double the drop seen in earlier studies of divorced women in their early thirties.
Although the spousal support award includes a standard of living component that aims to minimize post-divorce modifications, a spouse cannot be entitled to all of the luxuries they had during the marriage. Nor can excessive spending habits from the marriage be maintained.
After a divorce, the standard of living for older males drops by 21%. Previous research has revealed that divorce has a minor or non-existent impact on the income of younger males.
Even more concerning is that elderly people are not recovering from these financial setbacks. Researchers tracked survey respondents’ finances for up to a decade after their divorce and found no discernible improvement in wealth or lifestyle.
Older Americans just don’t have the time or resources to repair the financial damage that a divorce entails. It’s tough for women who have spent most of their adult years at home caring for children to re-enter the workforce, especially if we’re talking about women in their late fifties or above who don’t have a clue about sustaining themselves. They may be in even more serious problems by the time they reach retirement age.
Women in their sixties and seventies who have gone through a divorce have a poverty rate of 27%, more significant than any other age group and nine times higher than married couples.
Divorce may throw even the most accomplished people off balance. Hedge fund managers’ performance can be harmed by both splitting up and getting married, according to a study published in the Journal of Financial Economics.
Divorce and marriage are highly personal occurrences that divert fund managers’ attention from their investment responsibilities. Managers underperform by 4.3 percent per year in the six months leading up to a divorce, and they continue to underperform by 2.3 percent per year for up to two years following the divorce.
Divorces are even more likely to affect chief executive officers and the firms they lead. Divorce has a statistically significant negative impact on performance, particularly for small businesses with fewer than ten employees. One argument is that the CEO becomes more crucial when the company is smaller, and other employees cannot compensate for a stressed-out and distracted CEO.
Attorney Sean M. Cleary is a high-net-worth divorce expert. He is the founder and president of the Miami, Florida-based The Law Offices of Sean M. Cleary. Sean is part of Florida’s Legal Elite and Multi-Million Dollar Advocates Forum. www.seanclearypa.com