Advising clients in later-life divorce: the rise in "gray" divorces makes CPAs' advice and talents more critical than ever to the process of dividing retirement assets.

• Author: Stewart, Tracy
• Position: Certified public accountants

Over the past two decades, the divorce rate has doubled for married Baby Boomer couples age 50 and older. For those older than 65, the divorce rate has more than doubled. And over 55% of those "gray" divorces involve couples married for more than 20 years. In fact, a shift has occurred in recent decades, and now a larger proportion of older adults are divorced than are widowed. However, the traditional focus of gerontological research on widowhood does not include divorces. Researchers have not been focusing on divorce in this age group and therefore know little about the consequences and predictors of later-life divorces.

CPAs are in a unique position to have a profoundly positive influence on the financial consequences of Baby Boomer divorces. Family law attorneys should not, and usually do not, give financial or tax advice. Many family law attorney engagement contracts specifically state that they do not give financial or tax advice. Yet those same attorneys often fail to refer their clients to CPAs providing tax or financial planning services. With a little effort, CPAs can make themselves available to family law attorneys, offering to help their divorcing clients with short- and long-term financial and tax advice.

Divorce causes a reorganization of family wealth and is considered by many experts as the most traumatic event in the life of a married person. A first divorce is often the clients' first experience with legal matters. They know they do not have enough time left to rebuild lost retirement nest eggs. When this concern is combined with age-related health issues, children's college expenses, and a reluctance to start over again, a divorce at this life stage can be frightening. For some couples, one spouse has never or only briefly worked outside the home. One spouse could be much younger than the other. There may be a wide disparity of earning power between them.

While an array of issues must be addressed in a later-life divorce, perhaps the least understood technical area is the maze of options for dividing precious retirement benefits and accounts. Retirement accounts have complex rules regarding division; in fact, some cannot be divided at all. This is a minefield for clients. While it may not be feasible to master all the details, CPAs who grasp the key concepts and issues in dividing retirement assets in divorce will be in a better position to advise their clients, and those clients will be deeply grateful for the assistance.

Understand the Account

The first thing to understand about retirement accounts that may be divided in a property settlement is the status of the accumulation of retirement...