delay retirement. Another major issue
is that gray divorce is often followed
by depression, mostly suffered by the
[ex-] wives. It’s a calamity from both the
financial and psychological viewpoints.
The spouse who’s less well-off income-wise or career-wise should get advice as
early as possible.
Should she or he see the advisor they’ve
had as a couple or find a different FA?
That’s one of the messy pieces. If she
talks to the advisor they both have, that’s
probably creating a conflict or ethical challenge; so the advisor may end
up saying, “I’ll only represent you” or
“I’ll only represent your husband.” Our
advice, therefore, is to find a third-party
What happens with a couple’s
The couple [probably] has to create
two new separate retirement plans.
Generally, you’re dividing the assets
down the middle, and the couple’s
retirement plan will typically be divided
50%/50% too. Some of that is dependent on the state people live in; for
example, whether or not it’s a 50%/50%
community property state. In “
equitable distribution” states, the general
rule is a 50%/50% division of assets
acquired after the marriage. Usually for
the spouse not in a 401(k) plan, there’s a
rollover to an IRA.
What about the tax aspect of gray divorce?
In cases where one spouse is in a lower
tax bracket, his or her having more of
the retirement plan and less of other
assets makes sense. But the tax piece is
often where the less [financially] sophisticated spouse gets taken advantage of
because they don’t understand pre-tax
vs. after-tax money.
Have the new tax laws complicated things?
Yes. For one, the deduction of alimo-
ny [for the spouse who pays it] has
gone away, and that has changed the
negotiating tactics. You need to have a
good CPA in the mix.
What if, in addition to a 401(k) plan, the
couple has a portfolio of investments?
If they’ve built it up during the marriage,
generally it will be divided 50%/50%.
But it can get messy when, as I’ve mentioned, one spouse tries to prove that
some of those assets came prior to the
marriage and should be on their side of
Is this where an FA can be quite helpful?
There’s some really great planning that
can be done, though a lot of family
law attorneys are reticent to go in that
direction because you’re getting outside
the bright lines of the law. So you get
a collision of what makes sense from a
financial viewpoint versus what makes
sense from a legal viewpoint.
What if one spouse has never worked
during the marriage?
The very tricky thing in a gray divorce
is that the husband may be closer to
the end of his career, and therefore the
negotiated alimony may become shorter.
That makes it harder for the wife to get
back on her feet. These negotiations can
be very difficult. We had one recent case
where the husband argued in mediation
that he had only about three or four
good years ahead of him, and so the
alimony should be for only three or four
years and then cut off completely.
Can a prenuptial agreement make gray
In many cases, we’re not even sure if
that’s advisable. This is where you get
into the art and science of financial
planning. Often a prenup taints the
relationship to begin with. If you’re
being hard-nosed that you have a sepa-
rate pot of money the couple isn’t going
to use because “You [the other spouse]
might leave me someday,” that doesn’t
build a healthy foundation for a long-
What if the couple owns a business
That’s usually way messier than any-
thing I’ve already described. Some busi-
nesses have a good buy-sell agreement
about who will buy out whom. But, typi-
cally, with married couples, it gets back
to [in early marriage]: “We’re in love. So
what could happen?”
Many times the spouse who’s staying
in the business wants to value it as low
as possible and the one leaving wants to
value it as high as possible. It gets into a
court situation, and they duke it out over
Would you like to share anymore advice?
This isn’t for every advisor, but it’s
something most advisors need to know
more about just for giving general
advice. Those who want to go deeper
into the gray divorce space should recognize that they have to be able to deal
with clients who are in a highly fragile
emotional state. If that’s not their ideal
client, they may not be the ideal advisor
for that individual.
A combination of very strong empathy but also the ability to maintain professional decorum because you’ll get
into situations like the one I described
where the spouse was ready to fold her
cards and give in. If the advisor says,
“Let’s think about having Plans A, B and
C,” but doesn’t deliver that in the right
way, it might hurt the spouse’s emotional state more than help it.
The ideal advisor for the gray divorce
niche should be able to figure out which
side is needed: the analytic side or the
empathy-and-professional decorum side.
They need good skill sets for both.
Jane Wollman Rusoff is a contributing editor
who specializes in interviews with thought
leaders. An author and prolific journalist, Jane
is founder of www.FamilyStarProductions.com.