Silver splitters: The rise of silver divorce | Hong Kong

Although the majority of divorces in Hong Kong occur when the parties have been married for between 2 and 10 years, there is a global trend, which also affects Hong Kong, for couples to decide to divorce later in life. 

Commentators have considered a number of reasons for this relatively new phenomenon: the fact that people are living longer, and well into their eighties, may mean that the prospect of living a further 20 plus years in an unhappy relationship spurs them into action. It may be that the parties realise that, when the children leave home, they do not share much in common. It had been the case that the financially weaker party, normally the wife, would not wish to divorce for reasons of financial security, but in recent years, both parties in their 60s may have had their own successful careers and are financially independent, or they are aware that there are laws which will protect them into the future. For whatever reason, the trend is there and it throws up unique challenges for such couples and those advising them.

Asset division and future needs

How would the family courts view the division of assets following a long marriage? In Hong Kong, following a long marriage, the courts would be likely to divide the assets equally, assuming that the parties’ needs have been catered for. Typically, the marital pot will be larger, having accumulated assets over time and paid off debts, but it will be finite with no more income coming in and the prospect of two households to maintain. As life expectancy is unlikely to stretch far into their 90s or over 100, on a strict future calculation, their daily needs for life may well be met by the assets available. Needs, however, may increase with age, particularly in relation to medical and care expenses.

Generally, when both parties are at retirement age, their needs are similar, and their earning capacities are equally limited. Thus, with younger couples, it may be the case that a greater earning capacity can result in a slightly higher award to the financially weaker party, this is not normally a consideration in older couples. Another consideration with younger couples is the question of ongoing maintenance for the financially weaker spouse, which is normally combined with child care responsibilities. As there are no such considerations with an older couple, the court will be more likely to order a clean break. Considerations such as earning capacity or particular disabilities will be taken into account, however, and if the court finds so, may tip the balance in favour of the financially weaker spouse.

The type of asset to be divided

Therefore, the asset division of 50:50 may be fairly straight forward but what may be significant is the type of asset to be shared. Typically, with older couples these are the former matrimonial home (which by then may be mortgage free) and the parties’ pensions.

With older couples, it may be that the former matrimonial home will need to be sold in order to cater for the provision of two smaller homes. If two other properties are to be bought to cater for the parties in the future, it may be that it will be necessary for  one or both to take out a mortgage. This may have complications of its own for retirees.

If one party is keen to retain the home, it may be that a ‘trade-off’ can be made with other-significant assets, such as the parties’ pension.

Pensions acquired during the course of the marriage are considered matrimonial property and will be divided the same way as other matrimonial property. They may even represent the biggest financial asset of a marriage - occasionally worth more than the house, particularly if the latter is mortgaged. For those divorcing in their sixties, it is common for one person to have been the primary earner throughout the marriage with a much larger pension pot than their spouse’s.

Valuing a pension may be complicated. The courts have recognised the illiquid nature of the pension or provident fund, and where the parties are some way off their retirement, some discount may be made to the present face value of those assets. The courts are also bound to consider, in their deliberations in finding a fair outcome, to take into account the loss of chance of a party in acquiring a benefit in such an asset upon marriage dissolution. It is not for one party to decide to commute any part of the pension. If the couple had intended to live on this in retirement, then sharing it fairly in divorce can be vital for the lower earner.

There is often a considerable emotional attachment to both the former matrimonial home and the parties’ pensions: both may represent the lives lived by each party. Considerable care is required when addressing both types of assets following a long marriage.

Other considerations

Another legal consideration involves the way the parties may have arranged their financial futures. Although there is no estate duty in Hong Kong, tax issues may be significant, and if there are assets overseas, tax advice will be required. Care should be taken where family trusts are involved or if there have been any beneficiary designations, executor appointments, and any provisions related to the ex-spouse. The parties will need to update any existing Enduring Powers of Attorney in order to appoint someone else if the ex-spouse was previously the designated attorney. Both parties should update existing Wills and other estate planning tools to reflect the changes in the circumstances after divorce.

If either or both parties are considering a remarriage, silver splitters may need to consider the financial effect on their children and grandchildren. It will be important to be clear and up front with everyone about how family money should be protected in respect of the new partner in order to leave assets to an existing family. Such parties should consider a prenuptial agreement to ringfence assets that are intended to be passed on to children and grandchildren. Parties may even consider an early distribution of family assets amongst family members of the second or even third generations, should there be sufficient assets with which to do so.

Although the prospect of divorce as a silver splitter may seem attractive, care should be taken that parties are looking at the future with a clear eye. Asset division can be heartrending in itself and complicated. Add a certain degree of loneliness, future medical and care needs, family disruption and generally a diminished standard of living into the mix and perhaps ‘til death us do part’ does not seem to be such a bad idea after all.

This article was originally published by Hubbis, on 30th October 2024.