Money And Property Division Issues in Elderly Divorce

Although the so-called “gender pay gap” has leveled off in recent decades, women still earn about 85 percent of what men in comparable positions earn. Most researchers theorize that this gap exists not because of discrimination, but because many women interrupt their careers for one reason or another, and this pause significantly inhibits their earning potential later in life.

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Where divorced men and divorced women are concerned, the pay gap effectively becomes a wealth gap, because older women cannot turn back the clock and fill in the gaps on their resumes with an expanded employment history. Therefore, in gray divorces, judges often account for the fact that divorced women rebuild wealth at a slower pace than divorced men.

California courts are aware of this wealth gap and take this into account when dividing assets during an elderly divorce.

Dividing the House in an Elderly Divorce

Real property is notoriously difficult to value, yet an accurate appraisal is the first step towards a lawful distribution. California is a community property state, meaning that in most cases, marital property is divided evenly between the spouses, and a joint residence is almost always marital property. The tax appraiser’s value may be misleading, because taxing authorities often inflate the home’s value for revenue purposes. So, a professional appraisal by a realtor or other professional is almost a must, and if the parties cannot agree on who should perform this task, the court will probably appoint someone unilaterally.

All that being said, marital property often becomes commingled with separate property, a concept that is discussed below.

Among younger couples, the mortgage balance on a marital residence is often so high that the most decisive division factor is which spouse, or if either spouse, can afford to maintain the premises without a permanent subsidy from the non-occupant spouse, which is not legally feasible in most cases. However, an older couple often has a house with little or no loan balance, and that economic reality presents a wide range of legal issues. Typically, with a low loan balance and a high equity amount, neither spouse has the cash to “buy out” the other one.

An owelty lien for partition is often a good way to divide equity between the spouses without any money changing hands. Assume the marital residence has $200,000 in equity, after deducting the unpaid principal balance on the mortgage loan. Rather than a $100,000 payout, the non-occupant spouse might obtain a $100,000 lien, representing half the equity. When the residence is sold, the lien must be paid out of the sales proceeds.

The non-occupant spouse might also accept periodic payments to satisfy the debt; however, bear in mind that inflation comes into play, as today’s dollar  is more valuable than tomorrow’s dollar. Also bear in mind that the divorce transfers legal title to the house but does not affect the note. So, if the occupant spouse wants to change the terms of the mortgage, the bank will not do so without the non-occupant spouse’s consent; likewise, if the occupant spouse falls behind on mortgage payments, the bank can seek payment from the non-occupant spouse.

Typically, a mortgage refinance is the only way to remove the non-occupant spouse’s name from the note.

Furthering complicating the process is the fact that because California is a community property state, the court will typically place restrictions on what can be done during the divorce process. According to Lawguru.com, a party to a divorce could face negative consequences if he or she sells or transfers property during the dissolution process without the spouse’s consent.

Commingled Property

For marriage dissolution purposes, real estate title is often mixed between community and separate property. For example, assume that Husband and Wife decide to purchase a rent house, and at the same time, Wife’s family gives her some money. During subsequent divorce proceedings, she says the couple used the money to buy the house, but he says that the money went to fund some modest improvements.

If the gifted money essentially enabled the purchase, the rent house is arguably separate property, but if the gift paid for new carpet and a few miscellaneous repairs, the rent house is probably community property. The stakes are high, because the increase from separate property is separate property and the increase from community property is community property.

The spouse challenging the community presumption must present clear and convincing evidence, and many times, the financial records simply do not exist. Fortunately, an attorney can partner with a forensic accountant or other professional to gather the evidence needed to carry the burden of proof.

Retirement Accounts

Other than the house, a 401k, IRA, or other retirement account is normally the largest marital asset, and like any other property, it is subject to division. The owner spouse may have made most or all of the financial contributions, but the non-owner spouse presumptively made equally valuable noneconomic contributions, and this presumption is conclusive.

Generally, the non-owner spouse is entitled to half the value of the account that accumulated during the marriage. In terms of payout options, most Qualified DOmestic Relations Orders (QDROs) allow the non-owner spouse to roll the share over into another tax-deferred retirement account. Other spouses may opt for a lump-sum payout or a proportional share of future benefits.

Different rules apply for military retirement accounts, largely because of the 10/10/50 rule.

In addition to particular personal issues, gray divorces often have unique property division issues.

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