Partner Article

Taxing times for the ‘silver separators’

Much has been said about the pressure on our health service and the problems of funding pensions for an ageing population, but it seems another trend is emerging as a result of us all living longer.

With 60 being the new 40 (as in ‘life begins at’) there is a growing number of divorces later in life, otherwise referred to as ‘grey divorce’ or ‘silver separation’. Expectations of life in retirement have changed over the last decade, with people living longer and seeking more fulfilment – unlike perhaps our grandparents, sticking with a difficult marriage after the children have flown the nest is no longer an acceptable prospect.

Even though divorce is much simpler and potentially cheaper when there are no young children to consider, tax and financial implications still impact on divorces later in life.

One of these is the thorny issue of pensions. It seems that many of the over-60s seeking divorce are men, and this can leave women who have in some cases sacrificed financial independence to raise a family in a precarious position. Having hoped to rely on their husbands’ pension income in retirement, they may have built up little or no pension provision personally.

There are a number of different ways of splitting a pension pot, and so it is crucial that anyone currently going through a later-life divorce seeks professional advice and discusses the impact it will have on their retirement income and the timing of access to it.

Inheritance tax is also more relevant on a divorce in later life, particularly where there is significant wealth. More proactive tax planning may be necessary to protect wealth for future generations; particularly where a second (third, fourth) marriage is on the cards and a risk of wealth dissipating to an extended family. Trusts and family investment companies might also be useful for those looking to protect their wealth for the long term.

Going through a divorce at any age can be difficult and distressing, but for those going through the process in later life, making sure they carry out tax planning in conjunction with their divorce could potentially protect them financially for the rest of their lives.

This was posted in Bdaily's Members' News section by Baker Tilly .