Financial advisors show their value as the number of 'gray divorces' accelerates

More advisors are finding themselves in a gray area.

“Gray divorce,” that is.

Referring to marriages terminating after age 50, so-called gray divorce has surged in recent decades. Divorce rates for those 65 and older have tripled since 1990, reaching 15% in 2022, while overall divorce rates have declined. In 2019, 36% of all divorces involved people over 50, according to a report earlier this year from researchers at Bowling Green State University, who also predicted the number will grow due to increased longevity and a greater willingness to leave unhappy marriages.

For couples splitting later in life, the shock also hits their savings and retirement accounts, which are generally more substantial than when the couple were newlyweds. And that’s where wealth managers become part of the often-fractious affair.  

Philip H. Weiss, principal at Apprise Wealth Management, says the transition from one integrated plan to two separate retirements can happen almost overnight and is the single biggest shock. 

“You now have two households drawing from the same asset pool. And creating two households from one typically translates into higher total expenses. In addition, the tax profile changes. You go from the married filing joint bracket to two single brackets,” Weiss said.

Tracy Byrnes, vice president of Women & Investing at Lebenthal Global Advisors, agrees, saying that one of the biggest financial shocks in a gray divorce is realizing that the income and assets that were once designed to fund one household in retirement now have to support two – and with little time left to recover, depending how old they are.

“Fixed costs like housing, insurance, and utilities double overnight, but Social Security benefits and retirement savings don’t. And at this stage of life, many couples may already be drawing down assets instead of accumulating them. And if estate documents and beneficiaries aren’t updated immediately, carefully planned legacies can unintentionally flow to an ex-spouse,” Byrnes said.

A lifetime of divided labor can also be a problem. Rebecca Jackson, founder of SeedSafe Financial, says she oftens sees that one partner has taken the lead on managing day-to-day finances or overseeing investments, leaving the other with limited visibility into their full financial picture. This lack of clarity can create deep uncertainty in the midst of emotional upheaval.

“Suddenly, you're no longer sharing rent or expenses, but trying to maintain a similar lifestyle with half the assets and potentially higher individual costs. The result can be a sharp recalibration of what retirement looks like, and what legacy is possible. It's not just a financial shift, it's an emotional one too,” Jackson said.

Keep it out of court
 

When it comes to protecting large estates and investments from getting tied up in taxes or litigation, Weiss believes the key is to treat the divorce like a complex transaction rather than as a simple distribution. Most importantly, make the division of assets tax-equivalent rather than dollar-equal. In other words, make sure to model after-tax outcomes.

“While I've seen this mistake made, you don't want to swap $1 of pre-tax IRA assets for $1 of brokerage or Roth assets. You also want to address issues such as cost basis in stock, loss carryforwards, NUA employer stock, RSUs/ISOs, and QDROs subject to ERISA vs. non-QDRO IRA transfers,” Weiss said.

Lebenthal Global’s Byrnes warns those going through a gray divorce to freeze everything immediately and review all beneficiaries. That includes retirement accounts, life insurance, and trusts. She also advises against making emotional moves such as quickly removing names from property titles, which could accidentally trigger unexpected taxes. Instead, restructure ownership with a clear legal and tax strategy so you're not creating problems later.

Family businesses and dynasty trusts add another layer of risk, because without proper structuring, divorce can pull partners into litigation or accidentally expose inherited wealth to division.

“What looks like an equal split often isn’t.  A spouse who takes lifestyle assets like the home or art may end up asset-rich but cash-poor, while the other walks away with income-generating funds. So don’t make rash decisions,” Byrnes said.

Finally, SeedSafe’s Jackson says communication is often the most overlooked tool during these tense negotiations.

“Even in the wake of divorce, establishing clear lines of communication with your former partner can prevent misunderstandings that lead to costly legal entanglements. On the technical side, having a clear inventory of assets, understanding their tax treatment and cost basis, and crafting an equitable division of net gains can prevent surprises down the line,” Jackson said.

Emphasized Jackson: “A thoughtful, collaborative approach, guided by a trusted attorney, CPA, and financial advisor, can preserve both financial outcomes and emotional bandwidth.”