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Gray Divorce and Income

Are you involved in a “Gray Divorce” near or during retirement? An experienced Colorado Springs divorce and family lawyer can guide you through the legal process and assist in exploring your options. You have one bite at the apple in the court system so make it count.

There are some unique aspects of divorces that occur later in life – “gray divorce”. One important aspect is that people at or near the end of their working lives have less opportunity to recoup financially after divorce. The resources that they have accumulated may be all that they will have, therefore a fair division is even more important.

Income Sources in Gray Divorce

In gray divorce, income sources are often very different from those of younger couples, as income may be comprised of Social Security income, retirement income, and disability income. Social Security income is not considered property and therefore not divisible as such, however is considered an income source available for support if received. C.R.S. § 14-10-115(5)(P). In addition, Social Security income can be considered an economic circumstance. In re Marriage of Morehouse, 121 P.3d 264 (Colo. App. 2005), C.R.S. § 14-10-113. The age at which a person reaches customary Social Security retirement age depends on his or her year of birth. Recipients can receive reduced amounts early or can wait until past customary retirement age and receive increased amounts later. Social Security benefits can be accessed as early as age sixty-two at a reduced amount, with maximum retirement benefits not available until age seventy. There are no reported Colorado decisions addressing the appropriateness of imputation of benefits for a person of customary retirement age who has opted to defer benefits.

Additionally, spousal eligibility is relevant. A divorced spouse can receive benefits based on the other spouse’s Social Security eligibility if the marriage lasted at least ten years and the spouse seeking the benefit is sixty-two or older and unmarried. The spousal benefit does not reduce the wage earner’s benefit. A former spouse can also receive spousal benefits even if the wage earner is not retired so as long as both former spouses are at least sixty-two and divorced for at least two years. Social Security retirement benefits are taxable income.

Passive and Disability Income

Gray divorces may be more likely to involve passive income such as rental income, interest, or dividends. All of these sources of funds are defined as income. C.R.S. § 14-10-115(5)(F); (J-K). However, the recipient of passive income can change based on asset distribution changes related to the dissolution. This invokes the question of whether an asset should be treated as property, income or both.

It is possible to receive an income producing asset as part of the division of the marital estate and then also have the related income count for the purpose of calculating spousal maintenance. One important consideration is whether the asset has some value apart from the income stream it generates. For example, a rental property may have the value of the real estate itself in addition to the income stream generated from rent received. By contrast, an annuity does not have a value apart from the income stream it generates.

Whether an asset is treated as property or income or both can be a murky area. Consider that, "Income includes pension payment and retirement benefits actually received that have not previously been divided as property in this action…" C.R.S.§ 14-10-114 (8)(c)(I)(H), and e.g. In re Marriage of Morton, 369 P.3d 800 (Colo. App. 2016). Accordingly, if the retirement benefit in pay status has been divided as an asset in the dissolution, then it is not counted again as an income stream.

Gray divorce may also be more likely to involve disability income due to the increased age of the parties. Disability income could derive from a government source such as Social Security or veteran’s disability payments.

Social Security Benefits

Although Social Security benefits are not property that can be divided, they play an important role in the financial resources of the parties. Briefly, Social Security benefits are paid to a wage earner upon retirement based on contributions to the Social Security system, or paid to the spouse of a contributor. A recipient who is eligible for both wage earner and spousal benefits will receive the higher benefit.

After a minimum of ten years of marriage, benefits may be received based on the contributions of a former spouse after divorce. The spousal benefits may be received even if the wage earner is not yet receiving benefits if the spouse is at least age 62 and the wage earner is fully insured meaning that the spouse has contributed to Social Security for at least 40 quarters. The spouse must remain unmarried to continue eligibly for benefits based on his or her spouse’s insurance.

In addition to the areas covered above, there may be assets related to advancing age such as long-term care insurance with or without a cash value to be addressed. Long term care insurance is an economic circumstance as it reduces necessary living expenses. Further, as another example, it may not be possible to obtain life insurance to secure spousal maintenance if a party is not already insured. Retirement plans and the income flowing from them are often an important asset for older couples.

Ability to Work and To Retire:

In some cases, a spouse who has been out of the workforce for a substantial period of time may not be able to actually obtain gainful employment due to age, a lack of current skills or other factors. However, in order to avoid or reduce income imputation, reasonable good faith efforts to get back into the workforce should be considered.

Also, not everyone determinates that they are able to live on a reduced retirement income at customary Social Security retirement age and some parties continue working past that age. Some choose to work later to better maintain their lifestyle and standard of living for a longer period of time.

Turning Change Into Opportunity in Colorado Springs Divorce and Family Law

A knowledgeable and experienced Colorado Springs divorce and family lawyer can guide you through Colorado Springs divorce family law matters by negotiating, mediating and litigating on your behalf. You can focus on moving on to a better future instead of spending your time attempting to navigate complex legal rules and procedures.

Sabra Janko from Janko Family Law has 20 years of legal experience and has written “the book” on Colorado divorce and family law – “Colorado Family Law With Forms”, published by LexisNexis, which you can find at https://store.lexisnexis.com/products/colorado-family-law-with-forms-skuSKU02903. Contact us at 719-344-5523 or complete our online scheduling request for a free 30-minute informational consultation.

Client Reviews
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Excellent service! Sabra and her team work diligently while looking for all the little details that impact the case. Im so grateful to have found this firm. Great communication from start to finish. Also they were very patient with my lack of understanding the court process. Highly recommend! Chris Faucett
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As an active duty service member I can definitely say that at Janko Family Law Solutions I was served with the utmost professionalism, in a timely and efficient manner. Very glad I discovered these experienced professionals to assist me in my legal circumstances, and I will certainly be recommending them to people in the future. Rebecca Cody
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Sabra and her office are wonderful to work with! ... very knowledgeable, supportive, and compassionate during the entire process. The experience and legal expertise are evident. Tim Halladay
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