“Markets go up and markets go down” is the philosophical view of a financial advisor who participates in attorney Linda Gross’ “collaborative divorce” study group. But for divorcées, says Gross, a certified family law specialist in Santa Monica, Calif., it’s the state of finances at a fixed point in time that’s relevant. She notes, “There are many issues yet to be resolved around divorce and retirement,” many of them exacerbated by the economic downturn. Among them:

1. Slow recovery from the 2007-2009 bear market. “Prior to the market crash, lots of couples thought they had plenty of money,” Gross points out. Many still haven’t recouped the net worth they lost.

2. An unwelcoming job market. How can a divorce court judge impute future income to an older spouse who can’t find work? One of Gross’ clients, a 58-year-old woman with a Harvard MBA, has been looking for a suitable job for five years.

3. Hard-to-get health insurance. Marlo Van Oorschot, a family law attorney in Los Angeles and author of “How to Survive Grey Divorce,” points out that finding health care coverage can be difficult for divorcées under 65 who were covered by their husband’s policy. Issues with pre-existing conditions, plus the substantial expense of COBRA or an individual policy, may make it essential to find a job with group benefits until Medicare kicks in.

High local unemployment forced one of Van Oorschot’s clients, a stay-at-home wife for almost 20 years, to seek a job in another part of the state and rebuild her life there.

4. Caregiving complications. Two-thirds (66%) of caregivers are women, according to the National Family Caregivers Association. As parents (or in some cases, beloved ex-parents-in-law) become frail, divorcées may end up with unexpected financial and emotional burdens.

5. Sentiment versus logic. Amid a change of circumstances that can seem strange and scary, many divorcing women cling to a familiar asset that may remind them of the best of their old marriage: the family home. When a divorcing client of Linda Gross’ wanted to continue living in her house, her retired husband pointed out that its equity was worth $1 million. “He felt it should count as a million-dollar settlement, but the judge can’t order her to sell it,” Gross says. Despite the sentimental value of assets like a home, women may need to make trade-offs to avoid a dramatic drop in their standard of living.

6. Dividing assets that need to last a lifetime. The increase in retiree divorce will lead to more dilemmas about how to treat assets meant to generate lifetime income. For example, Gross says, if income is “available” but withdrawal is discretionary (i.e., a Roth IRA or reverse mortgage), should a divorce court judge tell the account owner, “Based on your life expectancy of X years, you should take out so much per month for a settlement”? Obviously, the withdrawal rate can’t be left to the discretion of an ex-spouse who would rather take out nothing, but how can the judge decide?

“It’s a very hard time in life,” Van Oorschot sums up. “How do we make the money work to minimize this very distasteful reality? I find, being a lawyer, that people hope we can create magic. But we’re stuck with the hard realities of the situation. We try to help our clients make the best decisions possible within that reality.”

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