Divorce for Vermonters over 50 years old

Getting divorced later in life—often called a "gray divorce"— must be navigated carefully to avoid financial ruin. Spouses splitting up in their 50s, 60s, or beyond face a distinct challenge: dividing a lifetime of accumulated wealth at the exact moment their remaining working years are shrinking.

When separating in or near retirement, there is very little time to recover from a bad financial deal. Divorcing when nearing retirement also poses serious financial dangers. Navigating late-life marital dissolution requires a firm grasp of specific Vermont court rules and asset protections.

Divorce issues specific to older Vermonters include:

• Real estate distribution

• Availability of mortgage loans in retirement

• Keeping a house or real estate asset in the family or selling it to split the proceeds

• Social security differences

• Alimony or spousal maintenance in retirement

• Health insurance issues pre-Medicare

• Medicare savings programs (MSP) shifts

• The need for estate planning after divorce

Long-term Marriage and Asset Division

Vermont operates under equitable distribution laws (defined by 15 V.S.A. § 751). This means the family court divides property based on what is fair, not necessarily what is a strict 50/50 split.

Crucially, Vermont courts have jurisdiction over all property owned by either spouse, regardless of when or how it was acquired. Inheritances, premarital assets, and individual bank accounts are all placed on the table for division. It doesn’t matter who’s name an asset is in – including real estate. 

The court will divide it all.

A Vermont court will divide assets 50/50 for older Vermonters who have been married for ten years or more. While the statute indicates that a judge will heavily weigh your age, physical health, actual retirement status, and future earning capacity when deciding who gets what, for people nearing retirement age who have been married a significant amount of time, it really doesn’t matter. The end result will almost certainly divide it equally.

How is the judge going to do this? Most of the time, a Vermont judge will add up the monetary value of your assets and then award them to each party to make an approximately 50/50 split by value. 

In the example below, the marital assets (called the marital estate in Vermont) total $905,000 and each spouse will get half of that, or $452,500. This is very likely a simplified version of what the court would do if Mary and Bill have been married more than ten years:

To Mary:

The house ($430,000), the mortgage (-$130,000) half of the joint checking account ($17,500), and part of Mary's 401k ($135,000)

To Bill: the investment account ($340,000), half of the joint checking account ($17,500), part of Mary's 401k ($55,000) and Bill's 401k ($40,000).

Meanwhile, the court will split Bill's VSTRS pension.

You may notice that there are serious problems with this asset distribution. These include tax problems, mortgage problem, and the pension problem. The tax problem is that some of these assets are after taxes and some are before. For example, the house is after-tax except for capital gains. The amount of any capital gains on a primary residence is beyond the scope of this article, but it is significantly less than on ordinary income. The investment account is after-tax, except for any capital gains. But Mary’s 401k has not been taxed at all and she will owe regular income tax on distributions from that account. So although the dollar figure works out to be equalized between Mary and Bill, Mary will have to pay taxes on $190,000 and Bill will have to pay taxes only on $40,000. Those taxes make retirement account dollars worth less than investment account dollars and the checking account dollars, on which no taxes are due, are the most valuable of all.

Meanwhile, if Mary and Bill have owned the house for a while, they likely have a very good interest rate on that mortgage loan. It may be as little as 2%, while current interests rates (as of 2026) are about 6.5%. If Mary has to refinance that loan – and she will need to, in order to get Bill’s name off the mortgage – she will end up paying more than twice as much per month in mortgage payments. Because she is in retirement, she may not be able to do that at all.

Another common problem illustrated in this example is the difference in available cash assets. While the bottom line is the same, Mary only has access to $17,500 in available money in the checking account. Everything else is in retirement accounts or the house. She is in a precarious financial position after this divorce where any unexpected need for ready cash could be disastrous. Bill, meanwhile, has access to $357,500 in cash between the investment account and the checking account. He has enough to put a downpayment on a home for himself and still have ready money for anything that comes up.

Finally, there’s Bill’s teachers’ pension through the Vermont Teachers Retirement System, VTRS. This asset is perhaps the most valuable asset in the marital estate. But there is no dollar amount assigned to the pension because its value depends on how long Bill lives. The pension will pay out a monthly retirement amount for that much time. If Bill lives to 100, that pension is probably worth something like $1.5 million. Many Vermonters don’t recognize that the most valuable thing in their marital estate is the pension if they have one. The judge will split the pension in half in this example and each spouse will receive half of the pension payments until Bill dies.

Of course, this is what a judge would do if there is no agreement between the parties. If we were advising Mary in this illustration, we would suggest agreeing to some other arrangement – maybe not including the house.