Divorce is not just for younger couples, and just because a marriage has lasted decades does not mean that it is invincible. Anyone of any age in Illinois may find him- or herself ready to end an unhappy marriage. But men and women who are 50 years of age or older face unique concerns, especially when it comes to things like retirement plans and certain tax changes.
Although the tax laws around alimony changed on Jan. 1, 2019, there are some who still believe that an individual who pays alimony can deduct that amount from his or her taxes. The new law no longer allows the person paying to deduct alimony, and the recipient will no longer pay taxes on what he or she receives. To offset the potentially negative tax impact of this flip, someone who will have to pay alimony may try to negotiate for a larger portion of the couple’s retirement savings. So long as he or she has a qualified domestic relations order — a QDRO — the retirement funds can be moved from one account to another without tax consequences for the person paying alimony.
Dealing with a divorce might feel like the only legal process one can handle, but protecting retirement funds also means updating beneficiaries. Whether someone remarries or chooses to remain single, after death, he or she may not want those retirement funds going to an ex-spouse. A bit of estate planning housekeeping is usually necessary, which involves updating beneficiaries for retirement, insurance and investment accounts.
Life can be tricky, and few people may expect to divorce near or even during retirement. But the reality is that this can and does happen to couples in Illinois, and dealing with retirement plans is just one detail among many others that people must deal with. Being as prepared as possible to face the challenge of a gray divorce can give someone the confidence he or she needs to move forward with the process.