According to the United States Census Bureau, overall national divorce rates have decreased in recent decades. But about 10 percent of couples don't make it to their fifth anniversary and about 25 percent call it quits before their tenth anniversary.
Not all rates have declined. The Wall Street Journal of March 3, 2012, notes a surge in the rates for "gray divorce" -- breakups by people over age 50. "Their rate has doubled over the past two decades." And for many of them, the article continues, "it is not their first marital split. Fifty-three percent of the people over 50 now getting divorced have done so at least once before. Having been married previously doubles the risk of divorce for those between the ages of 50 to 64. For those over the age of 65, the risk factor quadruples."
To add to their troubles, my experience is that most couples opting for divorces -- whether early or late in life -- fail to foresee that their breakups require them to deal with many complex financial problems in today's troubled economic times, and they have competing interests. The Journal cautions: "This is especially true of women."
What follows are simple steps splitting spouses should take to protect themselves financially. They're also smart practices for spouses who remain married as well as individuals in all stages of relationships.
Educate yourself for financial planning. In this lumbering economy, it's more vital than ever that you assume greater responsibility for your financial future. Don't rely exclusively on paid advisers. At the very least, become knowledgeable enough to raise good questions and evaluate answers when dealing with divorce attorneys and other professionals. The informed client gets the best advice.
A quick, low-cost way to become savvy is to sign up for adult education courses on taxes, investing and other aspects of personal finance. Select from an array of classes tailored to your interest that are available at places like high schools and community colleges. Courses cost a fraction of what it would otherwise cost to meet on a one-to-one basis with instructors, who are usually attorneys, CPAs and financial planners. Instructors use their hands-on experience to provide helpful, unbiased advice on topics that run the gamut from getting married or divorced, to timing the receipt of income and the payment of deductions to your best advantage, to opening, operating and closing business ventures, to when and how much money to take out of tax-deferred retirement accounts like IRAs and 401(k)s, to whether to make lifetime gifts of money and other kinds of property to family members or to leave the assets to them.
The courses alert you to money-saving techniques that you can apply yourself or, should you decide to seek professional help, test out on your advisers. And, conceivably, those advisers might turn out to be your instructors, whom you've had an excellent chance to evaluate.
Seminars for seniors. Be wary of retirement planning services and estate planners who invite seniors to free lunch seminars. An AARP survey of more than 1,000 people 55 and over found that many who attended seminars on retirement and estate planning were "pitched investments that were unsuitable for them or were asked for information that could expose them to financial fraud."
The invitations consistently offer the same enticements: "a free gourmet meal, and tips on how to earn excellent returns on your investments, eliminate market risk, grow your retirement funds, and spouses are urged to attend. These words should be red flags for investors," cautions the North American Securities Administrators Association on its Web site, nasaa.org. NASAA is an international organization devoted to investor protection.
Update beneficiary designations for insurance policies and retirement plans. Otherwise, proceeds might wind up with a former spouse or someone you now consider unworthy.
Prepare a will or make sure an existing will is up-to-date. Redo your will if you've divorced, legally separated or married since you wrote it. Your property intentions normally change when your marriage ends. And a remarriage also increases the complications, particularly when each spouse has children from previous marriages.
When you die without a will (intestate, in legalese), your assets pass in accordance with your state's intestacy laws. The absence of a will often means that your estate will be burdened with unnecessary administrative expenses and taxes.
Letter of final instructions. Checked beneficiary designations and written your will? Good for you. Also prepare a letter of instructions. This is the legal term for an informal document in which, among other things, you list the location of your important personal papers and assets.
Your heirs need to know what your assets are -- traditional or Roth IRAs; 401(k)s and other retire-ment plans from your employer or your business; insurance policies; bank accounts; mutual funds; brokerage accounts and other holdings like real estate; jewelry or art works -- where they are and how to dispose of them. Keep the letter up-to-date and accessible.
Watch withholding and estimated payments if you divorce or marry. You might need to submit new W-4 forms to employers or W-4P forms to pension administrators. Revise the amounts subtracted from salaries, bonuses or pensions up or down to make sure that taxes withheld will be in rough balance with taxes owed when filing time next rolls around.
Do you receive income from sources usually not covered by withholding -- for instance, alimony, self-employment, Social Security benefits, dividends, interest, and withdrawals from IRAs and other retirement arrangements? Act now to adjust estimated quarterly payments or withholdings.
Julian Block is an attorney and author based in Larchmont, N.Y. He has been cited as: "a leading tax professional" (New York Times); "an accomplished writer on taxes" (Wall Street Journal); and "an authority on tax planning" (Financial Planning Magazine). This article is excerpted from "Julian Block's Tax Tips for Marriage and Divorce " available as a Kindle at Amazon and as a print copy at julianblocktaxexpert.com.