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A “gray divorce” refers to a divorce or separation that occurs later in life, usually when the spouses have reached the age of 50 or more. While the divorce process does not differ, there are unique financial issues to consider. The parties may experience increased financial stress, as they will often have left the workforce and may be retired, with limited income available. And since family wealth may be divided, the parties may need to review their retirement budgets and financial planning.
Wife Needs Financial Support Following Divorce
Lammi v. Lammi illustrates how a divorce late in life can leave a spouse in a financially precarious position. Both parties were retired when they began cohabiting, with the husband being 62 years old and the wife 58. They married in July 2009 and separated in July 2017. This was also a second marriage for both parties. At the time of the trial, the husband was 82 years old, and the wife was 78. The husband had a monthly income of $5,620.97, while the wife received monthly payments of $806.63 from CPP and OAS, in addition to $1,200 from spousal support.
The parties signed Minutes of Settlement, which addressed most of the issues arising from their divorce, except for certain matters related to spousal support. The settlement terms were incorporated into a final order. That provided that the husband was to make an equalization payment of $176,000.00, as well as monthly spousal support payments of $1,200.00. The support obligation was to terminate on the wife’s death, but the issue of security for support was left unresolved, along with the question of what would happen if the husband predeceased the wife. Now, the judge had to decide whether the husband’s spousal support obligations should bind his estate, and if so, whether the estate’s obligation should be secured.
Significantly, the husband’s health was declining, and it was anticipated that he might shortly need to sell his house and move into long-term care. The judge acknowledged that the wife would continue to need spousal support after the husband’s death to be able to meet her living expenses.
Husband Claimed Savings Were Needed to Support Himself in His Old Age
The wife sought an order that the support order bind the husband’s estate, and that she be the irrevocable beneficiary of a $32,873 life insurance policy. She also wished to have an additional charge on the estate in the amount of $100,000, and that this be secured by either a second mortgage on the husband’s home, or alternatively, a security against his investments. She argued that she was in financial need and that the husband’s finances should be made available to meet her needs. In contrast, the husband sought an order that spousal support terminate upon his death. He suggested the attempt to bind his estate and to seek security for continued support after his death amounted to “double dipping”, since the wife had already received an equalization payment and had also received spousal support at the high end of the support range set out in the Spousal Support Advisory Guidelines. He also alleged that he had already remortgaged his house to make the equalization payment, and that his savings would be needed to support himself throughout old age.
In Katz v. Katz, the Ontario Court of Appeal accepted that courts can secure the payment of support obligations that are binding on the payor’s estate. Consequently, courts could secure the payments to be made in the event of the payor’s death by requiring the payor to maintain a life insurance policy for a beneficiary. But the Court also included a caution, warning that “where there is no existing policy in place, a court should proceed carefully in requiring a payor spouse to obtain insurance”. The Court went on to suggest that it would be necessary to have evidence of the payor’s insurability and the cost of obtaining insurance. Moreover, judges need to consider the amount of insurance that would be appropriate carefully. The Court indicated that the insurance should be less than the total amount of support anticipated, as the recipient would have the ability to invest the proceeds of a payout.
Courts Can Secure the Payment of Support Obligations
In this instance, the wife had advanced a non-compensatory claim based on the drop in her standard of living following the parties’ separation. But the judge recognized that this was not a typical case where insurance was being sought “to secure the payment of future child or spousal support in the case of premature death”. Given the husband’s age, the judge reasoned that his death could not be viewed as being “unanticipated”. Additionally, the parties’ agreement provided that the wife’s entitlement to spousal support ended upon her death, and Justice Newton also accepted that the husband was no longer insurable. The husband’s income would also cease upon his death, which the judge described as “the ultimate material change in circumstance”.
Nevertheless, the judge accepted that the wife was in need of financial support and that this circumstance would continue after the husband’s death. But while the husband was in a better financial position, Justice Newton recognized that he had limited financial resources. After deducting payments for his mortgage, property taxes, and spousal support, he had roughly $3,500 available for his monthly expenses. Noting the husband’s age once again, the judge also anticipated that he would require assisted living in the future, which would be an additional significant expense. It was also important to acknowledge that the wife’s request to be named as the irrevocable beneficiary under a life insurance policy was contrary to the parties’ agreement. And, it was true that the parties had equalized their family property, and the wife had an obligation to use her share of the property to generate income, which was to further her economic self-sufficiency. However, the judge was not satisfied with her explanation of how she had used her equalization payment. Yet, she faced financial hardship, and the judge agreed her need could constitute an exception to that general rule.
Judge Places Limited Support Obligation on the Husband’s Estate
Ultimately, this was a case where the parties cohabited and married after their retirement. But given both parties’ financial circumstances and their future needs, Justice Newton believed that a limited support obligation could be placed upon the husband’s estate. Therefore, considering the factors outlined in Katz, if the wife did not predecease the husband, she would have a claim for support against the husband’s estate, limited to $25,000. However, the judge did not issue an order to secure that obligation, recognizing that the husband would be uninsurable and that such an order would also complicate any future sale of his home.
A Gray Divorce Can Leave Spouses at Risk Financially
A divorce later in life may prompt spouses to reassess their retirement budgets and consider their financial stability. While divorce can always be challenging, older couples may need to think about healthcare, medical expenses, and insurance options, and take a comprehensive approach to this transition, so that they are positioned to achieve stability post-divorce.
Respected Windsor Family Lawyers Advising Clients On Gray Divorce Matters
The stakes are high in a gray divorce, especially concerning retirement security and asset division, as demonstrated by cases like Lammi v. Lammi. At Johnson Miller Family Lawyers, we are the respected Windsor family lawyers who understand the unique financial complexities faced by older adults.
Our team provides strategic, comprehensive advice to help protect your legal rights, safeguard your assets, and plan for your long-term financial independence during this transition. To arrange a confidential consultation and discuss your specific matter, please complete our online questionnaire or contact our Windsor office directly at 519.973.1500.
