This article by Deanne Gage originally appeared in the Sept. 2013 FORUM.
Married folk have been conditioned to believe that if they get past certain milestones — the seven-year itch, 20 years, the silver anniversary, and so on — they’re likely to stay together. But recent statistics offer a compelling sidebar. According to Statistics Canada, one-third of marriages will end before the 30th anniversary. And while we may think of young marriages dissolving after a few years, it’s the exact opposite. Call it “senior divorce,” where fifty-,sixty- and seventy-something couples go their separate ways after decades of marriage.
Take Maria Spanakis’s parents. Both hailed from the same tiny Greek village but met for the first time in Montreal in the early 1960s. They married soon after, raised a family, and lived the traditional stay-at-home mom/working-dad existence. They were part of a generation where divorce was taboo. You tough it out for better and for worse. So why did Spanakis’s father ultimately decide to call it quits after 37 years of marriage? “They both spent time taking care of family, and once that was over my dad said, ‘Now it’s time for me,’” says Spanakis, a portfolio manager with MacDougall MacDougall & MacTier Inc. in Montreal.
The “It’s-time-for-me” phenomenon — also called Empty Nest Syndrome — is fairly common among this senior demographic, where both women and men equally initiate divorce. As Tracy Theemes, a Vancouver-based financial advisor with Sophia Financial (Raymond James Ltd.) reminds us, life is long. You could spend upwards of 30 years in retirement, and once the kids leave home spouses may realize they have different goals and objectives for what time they have left.“ All of a sudden you really don’t want to spend that time having those negotiations. You realize you are no longer people who are compatible with each other.”
Angiola-Patrizia De Stefanis calls it something different — outliving the natural life expectancy of a marriage. “If you look at the statistics, it’s not so much that the number of divorces have increased over time. Marriages have ended at the same point, but while before they ended because people died,they now end in separation,” says De Stefanis, a collaborative lawyer with Vancouver-based Alliance Lex Law Corporation.
If you have clients going through grey divorce, your job is to help them keep theirfinances and feelingsintact. That often means examining financial issues before starting divorce planning, says financial guru Gail Vaz-Oxlade, who’s also a partner at Common Sense Divorce, an Ontario-based team of professionals that helps couples understand the divorce process.
“The divorce transaction itself is a very small part of the overall shock,” she explains. “There are usually cash flow problems. Sometimes only one person has access to funds. People need help figuring out what their rights are and what their next steps should be. The people they go to — friends and family — give them the worse possible advice like, ‘You need to screw him,’ and, ‘You can’t let him get away with that.’ That is exactly the wrong place to start.”
The Common Sense Divorce team will start with the basics, such as how to fill out financial forms and how to transition from where you are to where you want to be. “We bring all the components together and say, ‘Let us help guide you,’” explains Vaz-Oxlade.
Next, women need to understand the options available for spearheading a divorce settlement. Four main ones include:
The kitchen table method: The couple sits down and hammers out a separation deal they can live with. This is a good solution for couples who mutually agree to divorce and are amicable about how to split up assets and liabilities.
Duke it out in divorce court: On TV, divorce is often portrayed with two lawyers doing battle in court. But this is not necessarily the most effective method. Some are able to keep emotions in check and stay focused on the business at hand; others, not so much. Spanakis’s parents went the lawyer route, and their legal fees ate up a good portion of their retirement nest egg. “Not understanding what they were entitled to just delayed the process, and the fees went up to [almost] six figures,” Spanakis notes.
Mediation: The divorcing couple hires a third-party expert to help them create a pre-separation plan. “We give them a resolution plan that describes all the issues and how they will resolve them, primarily from a division of assets and support payments point of view, as well as parenting plans or scheduling that needs to be addressed,” says Paul Sweatman, senior negotiator for Fairway Divorce Solutions in Winnipeg. The couple then takes this agreement to two individual lawyers. Fairway charges a flat fee, which can considerably lower the cost of divorce court.
Collaborative practice: Lawyers, financial advisors and psychologists all come to the table with the divorcing clients to negotiate fair and equitable settlements. The couple needs to check any animosity at the door and agree to work together in a civil manner. “Here people look for a greater goal that is a healthier, more harmonious transition for their families,” explains Theemes, who also works as a divorce advisor in a collaborative setting. “We educate the couple about the different options. We can be the number-cruncher, putting together projections and give a proper valuation of assets and the consideration from a tax point of view,” she says. She’ll explain why a $500,000 principal residence is not equal to a $500,000 RRSP, for example. The couple pays all the different advisors by the hour, and on average it works out to about $15,000 to $20,000 for everyone, says Theemes.
DIVORCE AND DEBT
Not only is senior divorce on the rise, but so is household debt. While most demographic cohorts are looking to get their debts under control, a recent TD study found that the age 65+ demographic increased its debt load by 15 per cent in 2012.And according to Statistics Canada, separation or divorce has a larger negative effect on income replacement than widowhood, for instance. Put another way, family income could drop as much as 40 per cent since there are now two households — and all the expenses — to maintain.
Spanakis notes that her parents’ lifestyle changed dramatically — something she believes neither one of them considered when deciding to divorce. “When you’ve been married for 37 years you don’t expect to be penny-pinching as much,” she says. Her mother assumed she would be “taken care of ”until she died. Now in her 70s and living alone for the first time, there’s a lot of new firsts such as handling her own taxes and understanding how government benefits work.
“She had to learn the hard way,” Spanakis says of her mother shying away from understanding financial matters other than household budgeting. Her mom was determined to remain in the family home, but to do that she took on a small mortgage and now it’s “really hard to manage all the expenses on a small pension,” Spanakis says.“ She also had to get a job at the local mall just so she can earn a little extra cash to cover basic expenses.”
Spanakis, whose client base is primarily professional women, feels women need to be aware of how their lives are impacted by their choices.“We tend to seek advice and get involved in financial affairs after a major life event like divorce; but that’s not exactly the best time to be making life-altering decisions,” she says. “No matter how old you are, understand your own pocketbook and your own relationship with money. Never give up your power and control over your finances.”
She believes if her mother hadn’t taken such a hands-off approach to financial matters over the years, she might have ended up in a better financial situation.
Other women are better prepared for the financial reality divorce brings. Naguib Kerba, a branch manager and divorce planner with Investment Planning Counsel in Mississauga, Ont., says that two-income families generally bounce back faster after divorce since both spouses continue to earn income and have the potential to earn more as they advance in their careers. “They know the lifestyle may be somewhat different, but they are doing fine,” he says.
WILL CLIENTS STAY WITH YOU?
You may wonder about the impact of divorcing clients on your practice. Ultimately, there are three choices: one client family becomes two separate clients, one client leaves you, or they both leave. Vaz-Oxlade, who has been married three times, shares the same advisor as one of her ex’s and is comfortable with that. “I would never expect [my advisor] to tell me anything about my ex’s business. I trust him enough to know that,” she says.
How things will play out really depends on the relationship you’ve had with both spouses in the first place. Vaz-Oxlade uses the hypothetical example of John and Mary. The couple has been your client for the past 30 years. You know both spouses well, but primarily deal with John since he’s the one who makes the financial decisions. Mary prefers to stay in the background. John is an aggressive investor who likes high-stakes equities. Mary, on the other hand, likes safer and more secure investments.
“If all the advisor does is try to convince Mary that what John is doing is right — and some advisors tend to do that — Mary will see the advisor in John’s camp and she will move on if they split up.” But if you respect Mary’s need for security, the outcome is likely to be more favourable.
“Remember, Mary is just about to get half of those assets. She will make John sell some of his stock so she can have her share,” says Vaz-Oxlade. “If the advisor has not made herself indispensible by meeting Mary’s needs, she’s gone.” And so are the assets.
It’s tempting to encourage couples (in non-abusive relationships) to stay together to avoid the financial heartache. Big mistake, says Vaz-Oxlade. “Remember, money is just a tool, and it doesn’t matter how much money you have if you’re miserable,” she says. “So to say to someone you need to think of financial consequences — yes, you do — but you need to also recognize that the decision to divorce is a totally emotional decision, and trying to superimpose logic on a wholly emotional decision is impossible.”
What couples can do is minimize the shock to their family and their finances. That means not rushing into big decisions at once. The goal should be to feel safe and comfortable since getting through the emotional wear and tear can be enough.“I think sometimes we expect people to make big decisions at exactly the wrong time,” saysVaz-Oxlade.“We have a hierarchy of needs. So, finding new shelter is important, yes. But don’t ask me about my investment objectives for retirement — I don’t care [right now]. Since I’m at the bottom tier you can’t expect me to make decisions about anything that [doesn’t have] a direct impact.”
One big decision divorcing couples shouldn’t neglect is the changing of their wills. As Vaz-Oxlade points out, “The last thing you want is to let your ex profit from your death.” If you die and your will states your ex is to receive a good portion of your estate, he or she will get it regardless of the fact you are about to divorce or are currently divorced, she says.
When older couples succeed in negotiating their divorce settlements, they can move forward and begin the next chapter of their lives. And there’s reason to think it’s not all gloomy. The British journal Economica surveyed 10,000 divorcing people over a 20-year period and released their findings this past July. Turns out women are happier and more satisfied with their lives after a divorce despite taking a financial hit.
FORUM Sept. 2013. Deanne Gage.