Finances

Can A Reverse Mortgage Benefit A Divorce Settlement?

photo-1515180711443-f8685c6d6a74Divorce shouldn’t mean your life is over, but rather a new beginning to living life according to your rules. “Grey divorce” is becoming quite common as nearly one in ten marriages ends after being together for more than 40 years, according to Pew Research. As for the causes, this has been happening for various reasons – one of which is due to retirement. Elderly couples are looking to make their golden years enjoyable, even if life was either too busy or stressful in the past. So, can a reverse mortgage benefit a divorce settlement?

Dividing the Assets

Seniors often have many assets that are shared and nearly impossible to split. During negotiations, a family home is often one of the most sought-after assets as they are usually paid off and hold a lot of equity. That is why divorcees over the age of 63 are looking to compromise on a divorce settlement and help settle their assets with the help of a reverse mortgage. One of the benefits of a reverse mortgage is how it allows one partner to continue living in the home without paying for a mortgage nor have access to equity funds.

Splitting the Benefits of Homeownership

During the divorce settlement, splitting the home asset is usually the first decision to make. Instead of selling the home entirely, spouses could choose who can stay in the home and keep the reverse mortgage while the other party receives the equity funds. This useful tool helps couples reach an agreement without further complications. However, it is important to understand that the spouse who continues to stay in the home will be held responsible for certain obligations such as homeowners insurance and property taxes.

Provide Less Drastic Financial Changes

Perhaps the couple is used to living off two solid incomes – whether it be from owning a business, social security, or pensions from their retirement. After a divorce, both parties will be forced to adjust to the sudden drop in income. In some cases, getting the home in the settlement can be a huge benefit. The funds may come in a line of credit, monthly installments, or a lump sum. Additionally, if you plan to sell the home, using a reverse mortgage can help you purchase an entirely new home within your price range. What’s more, you will not have to worry about making the mortgage payments.

Author of this article, Lucy Wyndham, is a freelance writer and former Financial Advisor. After a decade in industry, she took a step backward to spend more time with her family and to follow her love of writing.  

Avoiding Debt During Your Divorce

Even though divorce can be hard, it can provide a new beginning, a fresh start from where to build a new independent life. With plenty to consider at this time, planning ahead can be vital in ensuring you have a financially stable future. Although daunting, this process provides the opportunity to refresh your financial situation and take control of any previous money issues.

There are a number of finance options available, including consolidation and refinancing, to ensure that you can stay financially afloat, whilst also getting the support to turn your life around and find happiness again. Before you potentially encounter financial concerns and worries, there are some simple tips you can follow in order to solve financial issues between yourself and your ex, making a smoother move forward.

Removing names for joint accounts

A simple task that is often forgotten involves the removal of additional names from a joint account. Although this is not always possible if there is debt owed, you can request that the account is put on hold. This will prevent your ex-partner, or yourself, from using the account and accumulating more debt. Once the debt has been settled remember, to close the account immediately.

Pay up as soon as possible

Although few people are in the situation where they can pay off their debt, especially during a divorce, it is important that you create a plan in order to do so as quickly as possible. The sooner this can be done the better, and if you and your ex are amicable it can make for a much easier divorce process, without having to battle out who will be paying for what account. Again, as soon as the account is zeroed, close it down.

Cancel old accounts

Perhaps you have previously opened a joint account with another bank and forgotten to close it? When separating many people create new accounts and go to alternative banks, however if they inquire and find they already have an account existing they can start using it again. If this is a joint account than any debt created on the account will also be in your name. Hopefully your ex would not knowingly create debt issues for you, however it is best to check that all old accounts are closed down in case you or your old partner decide you wish to open a new account with the bank.

With a divorce you do not need the further stress and worry of financial issues pilling up. If you can make sensible choices in this time, you should be able to avoid the unnecessary worry of getting into financial difficulty and see the independence as a move toward a better future. That way, you will have the time and energy to focus on the important things like you and your family’s happiness.

      Author of this article, Lucy Wyndham, is a freelance writer and former Financial Advisor. After a decade in industry, she took a step backward to spend more time with her family and to follow her love of writing.  

Divorce: A New Financial Reality

Besides adjusting to a new emotional reality, divorce means accepting a new financial reality; and many people this means transitioning to a single income. According to the APA, around half of American marriages end in divorce so this is something a lot of us will face in our lifetimes. Unfortunately for many divorcees, particularly women, transitioning to a single income can feel like financial disaster: according to research from insurance provider Allianz two thirds of women feel their divorce created a financial crisis.

Track your spending and anticipate future expenses

At any point in your life, tracking your spending is a good habit to get into but especially so when your marriage is ending. Find out how much you spend on what. If you haven’t tracked your spending until now, use your credit card statements to estimate previous expenses. There are a variety of budgeting apps to help you do this. Once you know your current spending, you can estimate how much you will need to continue your current standard of living. This is a good first step in negotiating a settlement.

Gather documentation

Having the right financial records to hand early on in the divorce proceedings is very important. Correct documentation can help you avoid misunderstandings when reaching a settlement. Gathering documents can take longer than you think so start early. Particularly important are your checking and savings account statements, as well as statements from retirement and investment accounts.

Health

Many couples rely on the coverage of one partner’s health insurance plan, so divorce can create a lot of health questions. There should be a way for you to get some kind of health coverage in the transition period. If you are eligible for a legislation known as Cobra, you can get health insurance for 36 months on your spouse’s plan. In addition, one’s health insurance may also cover dental care and medical expenses for lower income divorcees, as long as your divorce is equitable. Believe it or not sometimes people divorce intentionally and pile all of the assets on the well spouse so the sick spouse can get under the income threshold to qualify for Medicaid. This is known as ‘Medicaid divorce.’ The courts have caught on however so make clear you are not trying to do this by making your divorce equitable – something you should aim to do anyway.

Divorce can be a hugely stressful part of a person’s life but in reality a lot of people will experience it. With the right foreknowledge and preparation you can minimize the financial burden and embark on your new single life.

Author of this article, Lucy Wyndham, is a freelance writer and former Financial Advisor. After a decade in industry, she took a step backward to spend more time with her family and to follow her love of writing.