PLANADVISER - March/April 2020 - 11

'Gray Divorce' on the Rise
The trend points to increased financial risk in retirement
MORE and more older couples are calling it quits, and the financial ripples extend far
beyond property division. " This upward trend in couples divorcing over the age of 50 has
created a recent swirl among the estate planning industry, " says Ray Radigan, head of
private trust at TD Wealth. " 'Gray divorce' is adding another layer of complexity to the
estate planning process that already arises with blended families, designation of heirs
and the ever-changing domestic structures. "
The rise of gray divorce, in fact, affects some couples' retirement and estate planning
efforts dramatically, says a survey recently conducted by TD Wealth Management
Services. The report is based on an in-person
survey conducted during the annual Heckerling Institute
on Estate Planning summit, which took place in
mid-January.
As detailed by TD Wealth analysts, this year's survey
of estate planners and attorneys explored the increasing
rate of over-age-50 divorce. Besides finding that divorce
is challenging more couples in their pre-retirement
years, the survey also cites challenges tied to prolonged
life expectancy and rising health care costs.
Radigan says these factors mean it is more important
than ever for financial professionals to proactively
review and discuss the estate plans and retirement
ambitions of clients and their families-and to do so
on an ongoing basis. This suggestion is also buoyed
by the fact that the recently enacted Setting Every
Community Up for Retirement Enhancement (SECURE)
Act also made important changes to the treatment
of certain trust arrangements that may feature in
clients' estate plans. Chief among these changes is the
elimination of the " stretch-IRA [individual retirement
account] " strategy, but there are others to consider.
Divorce is very costly for individuals and, in
53%
of divorced
households are
at financial risk
in retirement
vs.
48%
most cases, reduces people's retirement readiness,
according to the Center for Retirement Research at
Boston College. Last year, the center's National Retirement
Risk Index (NRRI) found that 53% of households that have gone through a divorce
are at financial risk in retirement, compared with 48% of households that have not
experienced a divorce.
Further, the net financial wealth of non-divorced households is $132,000, about 30%
that have not
experienced
divorce
higher than the $101,000 held by divorced households. The center says that, overall,
divorce raises the possibility of being at risk by 7 percentage points. For couples where
one spouse is previously divorced, the risk rises by 9 percentage points.
Other costly effects of a divorce include short-term legal fees. Divorce also commonly
results in the sale of a house, which not only involves transaction costs but also can
occur at a suboptimal time in the housing market. Often, divorce requires that financial
and retirement wealth be divided between what are now two households. If financial
assets can be divided without being sold, divorce may not reduce total wealth. But if
assets are sold, again, the timing may be bad and sales can involve transaction costs.
According to the Boston College research, divorce also increases daily living expenses
because each ex-spouse now supports a household. They lose the federal income tax
break that married couples receive, and, in addition, divorced couples often have children
to look after, which can impede each individual's ability to earn a living. -John Manganaro
ON THE MOVE
➜ Franklin Resources
Inc., which operates as
Franklin Templeton, will
acquire Legg Mason
Inc. It will preserve
the autonomy of Legg
Mason's affiliates,
ensuring their brands
remain unchanged. The
acquisition establishes
Franklin Templeton as
one of the largest global
investment managers.
➜ Aon and Willis Towers
Watson announced
they will merge. The
combined company, to
be called Aon, will be
a technology-enabled
global professional
services firm focused
on risk, retirement and
health. John Haley will
be executive chairman.
➜ Pete Swisher has
launched Waypoint
Fiduciary LLC. It will
emphasize systems
consulting and research
for product builders and
strategists. Previously,
Swisher was senior vice
president at Pentegra
Retirement Services.
➜ OneAmerica
promoted Tammy
Rabe to senior director
of participant experience.
Rabe, in her sixth
year with OneAmerica,
most recently oversaw
its Retirement Market
Insights program.
planadviser.com March-April 2020 | 11
➜

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PLANADVISER - March/April 2020

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