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In a 'gray divorce,' it may make sense to cash out of the home

According to the Society of Actuaries, half of women and a third of men who are now in their 50s will live to be 90. Among married people, there is a 50-percent chance that one of the spouses will live to 92. That means that many people who marry at 30 will be together for 60 or more years. If you're not in a happy marriage, that can seem like a very long time.

The increase in longevity is probably one reason for the recent surge in so-called "gray divorce," or people getting divorced after 50. A recent survey of members of the American Academy of Matrimonial Lawyers estimated a 64-percent increase in such divorces. It also looked into the top areas of dispute in such cases, finding:

  • Alimony (83 percent)
  • Pensions/retirement accounts (62 percent)
  • Business interests (60 percent)
  • Houses and real estate (51 percent)

It makes sense that most of the disputes surround alimony and asset division. Most people over 50 don't have minor children, so custody and child support simply may not be issues.

That reality aside, the question of how a couple will divide their hard-earned savings and investments is critical for people 50 and over who are divorcing. Older people simply have less time to make up for any shortfalls in retirement savings or investments that may occur due to the divorce.

An investment counselor and former president of the Association of Divorce Financial Planners recommends focusing on retaining assets that generate cash, rather than those that use it. Traditionally, one asset that uses cash is the family home.

That may mean selling the house and dividing the proceeds is in order. However, doing so could mean taking on another monthly bill -- rent or a new mortgage.

To avoid that, one option is a reverse mortgage. The tool is not the right choice for everyone, but it does have the advantage of turning one monthly bill into a cash generator.

If you do plan to sell your home and divide the proceeds, a reverse mortgage-for-purchase could be used to pay for part of the cost of each ex-spouse's new home.

Another option is for one spouse to apply for a reverse mortgage and take a lump-sum distribution from it to buy out the other spouse's share of the home. If that lump sum isn't enough to pay for a new residence, the second spouse could use a reverse mortgage-for-purchase to pay the remaining cost.

As always, you should carefully discuss your goals and circumstances with your divorce lawyer or a financial planner before making any decisions.

With offices in Norcross, we serve throughout the Atlanta metro region.

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Norcross, GA 30071

Phone: 770-901-2917
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