Separation of Assets IAQ: Liquidity Concerns in Mid-Life Divorces
In a statistical sense, there is a correlation between age and wealth. In other words, the tendency is that people who are wealthier are older, and people who are older are wealthier. It makes sense: people who have had more time to save up…will tend to have more saved up. But there’s a specific time in a person’s life when the trend of increasing wealth often stops and reverses direction: retirement. When you retire, generally, you stop bringing in money and you start spending money out of your savings.
What this means is that, as the age of retirement approaches, often a person’s retirement accounts are among the largest assets they own, alongside their home and potentially a business. Generally speaking, however, retirement accounts have very specific rules that they must be split by, whereas the other major items can be handled more flexibly.
It’s often one or more of these other major items that divorcing couples would rather keep whole than see sold with proceeds split between them. The irony of the situation is that because the retirement accounts must be split according to law, the couples have one less asset that they can manipulate. This in turn makes it harder for them to divide up the other assets fairly.
That’s a significant part of why mid- and late-life divorces are prone to liquidity problems. If a couple has a half-million dollars in wealth but those dollars come mostly in the form of home equity and retirement accounts, the fact that the retirement accounts must be split in a particular way means that the home equity is probably going to have to be split as well. There’s little way for one person to end up with the house and the other to end up with enough money to compensate for the house.
The more money you have tied up in illiquid assets (like houses) and assets with a law dictating their division (like pension accounts), the more difficult it will be to reach a division of property that allows all of the largest illiquid assets to go to one partner or the other. Getting the value of each of those assets properly determined is a valuable first step, but having a lawyer on-hand who is familiar with the tricks and techniques of property division is just as — if not more — important.
Gucciardo Family Law has exactly those lawyers on-staff, and we’re just a phone call away. Dial 248-723-5190 for a complimentary consultation, and we’ll see if we’re the right family attorneys for you.
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