Couples initiating divorce in their later years, often termed 'silver splitters,' face a heightened and unusual risk: the death of a spouse before the divorce is finalized. This scenario can significantly impact financial claims, pensions, and inheritance, according to legal experts. The growing number of such cases presents complex challenges for all parties involved.
The consequences of a spouse's death during divorce proceedings depend heavily on how assets are held and the existence of a valid will. If a spouse dies before a financial settlement is reached, assets like savings and investments would typically pass according to the deceased's will or the rules of intestacy. For jointly owned property, the deceased's share might automatically transfer to the surviving owner if held as joint tenants.
Pension and Inheritance Complications
Entitlement to a share of a private pension can be lost if the pension holder dies before a pension sharing order is implemented. Similarly, pension death benefits are often at the discretion of the trustees, potentially leaving the surviving spouse with little or no benefit. The ability for the surviving spouse to pursue financial remedy claims within the divorce proceedings is also extinguished.
While claims can still be made against the deceased's estate for inadequate financial provision, these are generally more complex, less predictable, and governed by a different legal framework than standard divorce proceedings. Legal experts emphasize that remaining a spouse, rather than an ex-spouse, can offer greater legal entitlements, particularly if no will is in place.
Protecting Financial Interests
Experts advise couples considering or undergoing a late-life divorce to prioritize reviewing their estate planning. This includes updating or creating new wills to ensure assets are distributed according to their wishes, potentially severing joint tenancies on shared property, and reviewing beneficiaries for death-in-service benefits and life insurance policies. The process of divorce or contemplation of it does not automatically alter a will's existing terms.
Divorcing in one's 50s and 60s presents distinct challenges compared to earlier divorces, as there is less time to rebuild financial security. Decisions made during the divorce can have more profound and lasting consequences. Focusing solely on retaining the family home, for instance, may overlook the financial viability of maintaining it on a single income, especially post-retirement with reduced pension income.
Broader Considerations in Later-Life Divorce
Legal professionals recommend a comprehensive review of all financial assets, including savings, pensions, and investments, alongside any ongoing maintenance obligations, rather than negotiating assets in isolation. Later-life divorces can also involve more intricate family structures, including children from previous relationships, making updated estate planning crucial to reflect intended distributions upon death.
It is advisable to have financial settlements formally documented and approved by a court rather than allowing matters to remain unresolved. Furthermore, the introduction of new partners into the equation may necessitate specialist advice, as it can affect the financial settlement. The overarching advice for those divorcing later in life is to consider future financial and family circumstances over the next five, ten, or twenty years, not just immediate needs.