Gray divorce is a term that is commonly used to refer to the intentional ending of a marriage between spouses who have both been together for many years and who are both older than the age of 50. This phenomenon is becoming more commonplace, even though getting divorced later in life can be financially unnerving.
For example, dividing home equity can be uniquely challenging during a gray divorce, as older couples are more likely to have invested heavily in a property for decades than younger couples are. For many older couples in Indiana, a marital home represents one of their largest assets. Determining how to fairly divide that equity is, therefore, often a particularly consequential feature of the divorce process.
Common ways equity is divided among older spouses
Home equity is the value of a home minus any remaining mortgage or liens. When the need for a gray divorce arises, couples may have built up substantial equity over decades of ownership. There are several ways couples commonly handle the division of home equity during the gray divorce process:
- Selling the home: This is often the most straightforward solution. The home is placed on the market, sold and the net proceeds are split between the spouses. This approach allows both parties to make a clean break, with each receiving a share of the equity to use for new housing or retirement planning.
- One spouse keeps the home: In some cases, one spouse may wish to remain in the home, especially if they have emotional ties or want to avoid the disruption of moving. That spouse would typically “buy out” the other by refinancing the mortgage (if applicable) and paying their former spouse a fair share of the equity. This may require a careful review of finances to ensure the staying spouse can afford the mortgage and upkeep alone.
- Deferred sale: In certain situations, especially where adult children have returned home or a spouse is facing health issues, a former couple may agree to – or the court may allow – a deferred sale arrangement. The house remains jointly owned for a set period, after which it is sold and the equity will be divided.
Home equity can play a major role in shaping each spouse’s financial future, especially when there are limited working years left to rebuild wealth. It is, therefore, of little wonder that dividing that equity can be a stressful task for older, divorcing spouses. With that being said, it’s important to seek personalized legal guidance before settling on any particular course of action.
