Dealing with the financial fall-out of divorce among over-60s

The Irish Times – July 25, 2016

Ireland has one of lowest divorce rates but the number of ‘silver splitters’ is going up

Some 20 years since divorce was first introduced in Ireland, the numbers opting to dissolve their marriages have been lower than expected. Ireland currently holds the lowest rate of divorce in Europe and the third lowest in the world, after Mexico and Chile.

That said, recent Court Service figures show a 10 per cent increase in the numbers divorcing between 2012-2014.

One small element of this increase may be attributed to a growing number of over-60s who are opting not to live out their days married, instead choosing a dissolution of their relationship either via judicial separation or divorce.

For men, it may be an opportunity to embrace a new relationship; for women, it can be a final act of independence having lived almost their whole adult lives as dependent spouses.

Silver splitters

It’s not a trend unique to Ireland. In the UK, for example, figures from the Office of National Statistics show that divorce among the over-60s, the so-called “silver splitters” has been rising since the 1990s. 2012 figures show that 8.9 per cent of people over the age of 65 are now divorced.

By 2037, it has been estimated, almost one in every 10 people divorcing in the UK will be over 60.

Unfortunately, there is no breakdown on the age of people who apply for judicial separation or divorce in Ireland, as official figures from the Courts Service do not indicate the age of the applicant. Anecdotally, however, family law specialists would suggest that the number of Irish silver splitters is on the rise.

Family law solicitor Marion Campbell, for one, says divorce and separation in Ireland is largely driven by men and women in their late 40s and early 50s. But the over-60s have also seen a rise in judicial separations and divorce, she notes.

What’s behind it? For one, people are living longer, so when natural causes don’t part a couple whose relationship may be fraught, some will make the decision themselves to separate.

For Campbell, there are two factors behind the rise: “Men are getting involved in relationships with younger women,” and the fact that a relationship breakdown may have been on the cards for some time.

“The other issue would be that the marriage was not sustainable for a very long time,” she says. This may have been hidden by the couple’s circumstances if the wife was at home and the husband at work, each living their own lives.

“They may have only met each other at the weekend for a couple of hours,” she says. But when the breadwinner retires, problems can start arising when the husband is suddenly at home all the time and the cracks in the relationship become fissures.

“Women decide I’m not putting up with this anymore. I want to spend what’s the rest of my life with some sort of quality time,” says Campbell. “I always say to people: ‘Life’s too short – get out of it’.”

Dublin estate agent Felicity Fox  has also noted the trend, which she puts down to “empty nest syndrome” as children leaving home. “A lot of people hang on until the children are grown,” she says.

Changing morals is another factor.

“There has been a big sea change in terms of people’s attitudes to separation, the older generation now see it as acceptable,” says Campbell. “In the early 1980s, it wasn’t acceptable to separate”.

Divorce or separation

Women are typically the primary applicants in divorce proceedings – accounting for 55 per cent of applications in the years between 2008 and 2014. The same holds also true for the over-60s. “It’s primarily women of that age group who are instigating it,” says Campbell.

However, a judicial separation, is often enough, and many couples won’t seek a divorce thereafter.

“Once they’ve got through judicial separation, the last thing they want to do is step their feet back in a courtroom again,” Campbell says. Unless one of the parties wants to marry again, couples in their 60s and older will typically settle for separation, rather than proceed to divorce, she adds.

Huge delays in the system are also a factor in demotivating people from progressing with a divorce.

Unprepared

People who divorce in their 60s tend to share similar generational traits: the husband is typically the breadwinner; the wife may never have worked outside the home at all. This may leave the woman in a vulnerable position if she is not familiar with the family finances.

“Some women have no clue about their husband’s finances. They are the classic dependent spouses,” says Campbell. “But they will not come out of [divorce] the same way they went into it from a financial perspective”.

Financial adviser Eamon Porter  of Aspire Wealth Management is chairman of the Society of Financial Planners of Ireland. Porter has experience helping spouses in such situations, and points to difficulties such as assets being hidden.

As such, he urges both spouses to get involved in financial planning, particularly wives who may have adopted an attitude of “I trust him, it’s fine” during the marriage.

“Wives in particular should see a full list of assets,” he says, suggesting that this could be done ahead of any possible marital breakdown on the pretext of getting prepared for retirement.

“When things are good, you should be fully involved in financial affairs so if things go sour you have a good starting point,” he suggests.

Financial fall-out

Financially, many will argue that divorce is a straight route to poverty. With the same income, a family now has to run two households, and there may possibly be new additions to the family on either side, which can further drain finances.

“It eats into the wealth of both parties,” says mortgage broker and financial adviser Michael Dowling.

For the over-60s, the financial issue is particularly pointed because they are at a time in their lives when they may no longer be generating an income and instead have to live off what they’ve saved during their lifetimes.

For a dependent spouse, one advantage of waiting to get divorced is that the pay-out might be bigger. “From a financial perspective, the longer you are married, the bigger entitlement you might have,” says Campbell.

If the couple are already retired, then a pension adjustment order cannot be sought, because it will already have been drawn down. However, the courts are obliged to make proper provision for both spouses, and this may include a portion of a pension.

“If there are other assets out there, they [the courts] mightn’t touch a pension,” says Campbell. “They will try, if at all possible, not to touch that.”

So rather than a cut of a pension, a woman might get a higher proportion of the proceeds in the sale of a house, for example.

Finding a home

Another challenge is finding accommodation for both parties after the separation. The couple may be mortgage-free, with a substantial family home under their belts, but selling it and splitting the proceeds may still not be enough

“The awful thing about it is that people end up renting because they can’t afford to buy,” says Campbell.

Indeed, getting financing at this stage in life can be very difficult, says Dowling.

“The first difficulty that people over the age of 60 will face is that it is very difficult, if not impossible, to get a mortgage or any type of loan at this age,” he says. The maximum age banks such as Bank of Ireland and Permanent TSB will lend to is 70, he notes. Others, such as AIB, require full repayment by 65.

Compounding this is a shorter term, which will mean higher mortgage repayments. And proving repayment capacity, with stress tests of 2 per cent over the prevailing rate, may also be too difficult given the shorter term.

“You might overcome this if the term is 30 years, but if the term is five years it might be impossible,” says Dowling.

If one of the parties wants to hold onto the family home by buying the other party out, this can be more difficult in the absence of debt financing.

Another issue is life cover. While banks can waive the requirement to have the property covered by life insurance at their discretion, they may nonetheless seek it. And if you’re in your 60s with health issues, you may find it either very difficult, or very expensive, to get.

“At 60, it’s much more expensive than at age 30,” says Dowling.

In short, not everyone can afford to separate, and for others a lingering stigma may diminish their desire to do so. These couples may choose to live very separate lives but continue to share the house.

“I have come across couples living in the family home on separate ends of it,” says Fox, the estate agent. “They’ve nearly cut it in two.”

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