Arming clients with information from all supporting professionals vital in helping them navigate a difficult time
This article was produced in partnership with Lerners LLP
“Grey divorce” may not have a set-in-stone definition, but for a veteran family law lawyer, there is one factor she considers a hallmark: the couple involved are retired or near retirement.
“That changes what needs to be negotiated because there may be a retirement event coming or that's just happened, and the parties need to plan around that event,” says Joanne Stewart, partner at Lerners LLP with over 40 years of experience in family law.
People splitting up are forced to duplicate significant life costs, like homes and cars, and that’s become increasingly difficult to manage in today’s economy where defined benefit pension plans are rare, inflation is up, the rate of return isn’t great, and there’s a housing affordability crisis. And while a person in their sixties doesn’t have the runway to ramp up savings for the future like someone in their twenties does, they’re not exactly at the end of the road either.
“Life expectancy is much higher than in prior generations: it used to be that if you reached 70, it was considered a good long life, but now you might have another 20 or 25 years to live,” says Sarah Conlin, partner in and practice group leader of the Family Law Group at Lerners. “Someone who gets divorced at age 65 needs to figure out a way to support those 20-25 more years financially. Financial professionals should take a longer-term approach and consider all the angles.”
Financing the future solo
Financial professionals can get ahead of some of these issues by having a plan for older couples in the event of a split, especially if one of the spouses depends on the other to manage the family's finances and faces difficulties transitioning to financial independence. Suppose the monetary provider in the partnership is already retired. In that case, the other spouse may get no spousal support and will need efficient managing of their portfolio to receive consistent, stable income. Depending on their age, this financial roadmap will see them through the 20, 30, or even 40 years that follow the grey divorce.
That includes determining who will physically care for a person when they can no longer do it themselves and have no partner to look after them. With some private long-term care homes costing $8,000 a month and government funding grappling with the influx of the Boomer generation needing assistance — the working-age Canadians to seniors ratio continues to shrink, with upwards of 20% over the age of 65 — who bears the cost of care is a significant concern.
Many adult children would have their parents’ home put in their name before seeking subsidized care for that parent in a nursing home — but the government may eventually catch on to this, Stewart warns, pointing to an Ontario law passed in 1986 that allows for adult children to support their parents. Though not frequently adjudicated by the courts, similar to spousal and child support, will the government eventually start to claim against a person’s adult children to fund the person’s care.
There’s also the fact that adult children are often facing cost-of-living stress themselves and may not be willing or able to “run down the estate” with expensive retirement and nursing home options. People should turn their minds to who they’d want to appoint as powers of attorney for personal care and finances in the event of incapacity.
“Statistically, most people will have a disability before they die, so a discussion ought to be had, and then some cold-hearted thinking has to happen,” Stewart says. “It's those tougher things people don't turn their minds to when they're 30 or 40 — but they should.”
A starkly different financial picture
One situation Conlin and Stewart are seeing more frequently is when one former spouse stays in the family home but can’t afford to run it on their own, and an adult child, also struggling to make ends meet, moves in to help carry the costs. The adult child might eventually feel entitled to money from the home because of what they put in, whether it’s paying the bills, making repairs, or redoing the backyard, while the parent still sees it solely as their home. Ideally, there would be a legal contract around that kind of agreement, Stewart says, adding she believes this will soon be a new area of law “because it causes big trouble and not only money-wise — there are hurt feelings.”
Another common scenario is when a person going through a grey divorce has adult children they are helping monetarily, generosity that may no longer be feasible post-separation. Speaking again to the shifting demographics, some people have adult children that they support and aging parents on the other side who also require assistance. They are trapped in the middle of those competing interests, caring for two different generations, and now need to worry about their financial security as a single person.
“Overall, the financial picture looks so significantly different when it's a unit versus when it's two separate households,” says Conlin. “From a family financial planning perspective, grey divorce has an impact on multiple family members.”
Providing peace of mind
Financial professionals know the benefits insurance can bring their clients and can propose different products supporting their results. There are different kinds of insurance to deal with capital gains tax on a person’s death, such as long-term care insurance and critical illness insurance that, if purchased when a client is in their 30s or 40s, has reasonable premiums. Stewart notes that Insurance is always worthy of consideration, as is collaborating with other professionals in the estate planning sphere. The Family Law Group at Lerners is always willing to join forces with other helping professionals to deliver the message and get people thinking about these issues.
“Financial planners have a significant role either in providing advice or in putting together a professional team with particular expertise in relevant areas to help people,” Conlin says.
At the end of the day, the ultimate goal is for clients to be financially secure and confident in their ability to navigate what comes their way.
“A couple might come in and want to look at their legal obligations in various scenarios because they want to agree to provide around it,” Stewart says. “Between financial professionals, estate lawyers, family law lawyers, and insurance people, we can put together something that works really well and delivers great peace of mind.”
At Lerners, we understand the delicate nature of domestic and family-related legal decisions and appreciate the emotional toll they can have on those involved. With a successful track record that includes some of Canada's most complex family law cases, we dedicate ourselves to achieving results and helping you move forward with your life. Please reach out to us today to see how we can help.
