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Silver splitters

How Do Silver Splitters Divide Wealth?

The Increase in Older Divorcees Makes for Financial Complications

More over 60s are deciding to divorce than ever. This can lead to headaches and complexities when it comes to agreeing on the division of wealth.

Since the turn of the millennium the number of divorces has seen an 18 percent drop. Experts are keen to come up with a variety of reasons for this, ranging from fewer people getting married in the first place to the fact that so many living together for years before marriage, means there are fewer instances of “marry in haste, repent at leisure.”

There is, however, one demographic that is bucking this trend. The number of over 60s deciding to get divorced has risen dramatically over the same period. In 2000, approximately 6,400 men and 3,600 women over 60 got divorced. In 2013, this had gone up to almost 10,000 men and 6,200 women.

According to one of the best divorce lawyers, this rising trend in silver splitters can create greater degrees of complexity than those who divorce earlier in life. While the pain of dealing with issues such as custody and access of children is unlikely to arise, the financial side can be much more difficult to thrash out.

What are the problems?

Times are difficult enough for retirees. Pension funds are in crisis, other investments are struggling, and many are having to continue working later in life to make ends meet. To attempt to find a way of splitting resources that are already so severely limited can turn into an endeavour reminiscent of feeding the 5,000.

Where there are limited assets by way of savings, there can be genuine concerns that there will not be enough to go round, and either or both parties will have to return to work. But there is a potential solution – by the time they reach their 60s, most couples have paid off their mortgage, meaning there is plenty of equity tied up in the matrimonial home.

This does not necessarily mean selling up and splitting the proceeds, although that is certainly an option. But if one party wishes to stay in the home, another possibility is to use equity release via a lifetime mortgage to pay out their share.

How does it work?

This form of equity release is an option that is available if both parties are over 55. It allows the party who is remaining in the house to release equity from the value of the property. No monthly repayments need to be made while the party is still living in the former matrimonial home. Repayment of the principal amount plus interest only becomes due when the person either dies or goes into long term care. Typically, this will be financed by the sale of the property.

Any downsides?

Naturally, releasing equity from your property means you will leave a smaller inheritance for your family. Also, be sure to take independent financial advice before you sign anything.

Equity release schemes like these are regulated by the Financial Conduct Authority, and you will also be protected by a “no negative equity” guarantee. So even if the bottom falls out of the housing market, there should be no risk of your loved ones being left in debt.