Gray Divorce and Co-Habitation

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As most advisors are well aware, the majority of the wealth in the U.S. is controlled by baby boomers. However, two rising trends in this dominant demographic are creating complications, not only for boomers and their advisors, but also for the children of boomers who constitute an increasingly vital current and future client group.

Those two trends are gray divorce and non-marital cohabitation among U.S. seniors.

The rapid increase in gray divorce is well-documented. The most recent U.S. census data indicates that, while divorce is becoming less common for younger age groups (falling by 21% for ages 25–39 from 1990 to 2015), among older Americans, especially those aged 50+, the divorce rate doubled from 1990 to 2015. While the lower divorce rate among younger couples might be attributed to the decision many make to live together without being married, the greatest increase in non-marital cohabitation from 2007 to 2016 was among those age 50 and up. Cohabitation among persons aged 18–34 increased by 24% during this period; for those 50+, it increased by 75%.

From a financial planning perspective, there are several troubling implications from these statistics. For example, many of us have clients in their older years who are divorcing after decades of marriage and the accumulation of significant assets. Helping them navigate the painful process of dissolving a union and splitting up the estate is tricky enough. But suppose that one or both of the divorcing partners is also cohabiting with a new companion? This not only poses complications for the divorcing couple, but now the children are also concerned about how much of their presumed inheritance is going to Mom or Dad’s new live-in partner.

As financial advisors, we need to be prepared to help all the parties involved make good decisions. We also need to be ready to put in place the necessary structures and plans to put those decisions into practice.