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Divorce: Economic Issues

Two Key Developments

Two developments over recent years help to explain those projections, which will have an important impact on the economic situation of divorced persons:

  • • Changes in the divorce laws with regard to the switch in most states to "no fault" divorce (especially regarding alimony and child support payments) have important implications for the economic welfare of divorced women in their later years.
  • • As employer-sponsored pensions grow in importance as a source of retirement income, older women are likely to be in an increasingly disadvantaged position if current practices and laws do not change.

The "divorce revolution" was launched in 1970, the year that California passed no-fault divorce legislation. No-fault divorce laws have shifted the focus of the legal process from moral questions of fault and responsibility to economic issues of ability to pay and financial need. Ironically, although divorce reform was not intended to create fewer equitable settlements for women, in many cases that has been their precise effect. The no-fault divorce laws promised the abolition of all sexist, gender-based rules that failed to treat wives as equals in the marital partnership. However, a problem arises when the legal system ignores the very real economic inequalities that still exist between women and men in the larger society. Those inequalities are largely a function of the primary responsibility still assigned to women for the care of their husbands, children, and frail elders. The economic discrepancies between the sexes also reflect society's hesitancy to assign a monetary value to women's domestic work. Thus, by treating women and men "equally" at divorce, the legal system largely ignores the very real economic inequalities that marriage creates as a result of the division of labor within marriage.

The no-fault standards for alimony and property awards may be shaping radically different economic futures for divorced men and women. However, research to date on this issue is inconclusive. While some research indicates that the resulting financial situation of women under no-fault settlements is worse than for men, the study reported by Jacob concluded that the effects of no-fault divorce legislation on the economic status of divorced women may be neutral or even positive.

The second new factor affecting women is the evolution of pensions in the workplace. Employer-sponsored pensions play an increasingly important role in providing adequate retirement incomes for significant numbers of Americans. However, data show that large numbers of divorced women will not be covered by these plans, either through their own work or based on the pension plans of their former spouses. For example, in 1998 only 22 percent of unmarried women over the age of 64 received a private pension, compared with 31 percent of all aged units (Social Security Administration).

This situation is likely to have important financial consequences if it continues. Today pension accruals for many workers represent substantial personal wealth. This results primarily from growth since the 1960s in pension plan coverage and improvements in both pension benefit levels and vesting provisions (i.e., the years of service required before the worker obtains a legal right to his or her benefit).

Such accruals have become the subject of greater attention from attorneys and the courts, especially with regard to the question of a spouse's financial interests in pension wealth upon the dissolution of a marriage. How spousal rights to pensions are treated legally depends to a large extent on whether a particular state embraces community-poverty rules for a husband and wife, subscribes to common-law rules modified by the adoption of the Universal Dissolution of Marriage Act, or accepts the pure common-law concept of the property of husband and wife. For instance, in pure common-law jurisdictions, separate property remains such upon a marriage dissolution, and only jointly held property is divided and distributed. In New York (a common-law state), for example, pension benefits or expectations would normally be classified as separate property, and therefore no subject to distribution on divorce. In contrast, in the California case of Smith v. Lewis (California is a community-property state), a wife successfully sued her divorce attorney for malpractice because he neglected her interest in her husband's pension.

Additional topics

Medicine EncyclopediaAging Healthy - Part 1Divorce: Economic Issues - The Economic Situation Of Divorced Older Women, What About The Future?, Two Key Developments, Social Security Provisions Relating To Divorce