KMU-Magazin No. 6, June 2025 Gray Divorce: Divorce in older couples

The number of “gray divorces,” i.e., divorces among people aged 60 and over, has risen significantly. Divorce has far-reaching legal and financial consequences, especially in old age: from claims under old-age and survivors' insurance (AHV) and pension funds to taxes, living arrangements, and inheritance issues.

The statistics are clear: more and more couples are separating after several decades of marriage. In Switzerland, for example, the proportion of divorces among the over-60s accounts for over 15 percent of annual divorces. There are many reasons for this: increased life expectancy, financial independence, social acceptance of separation in old age—but purely financial reasons can also be decisive factors in divorce in old age.

Consequences of the “gray divorce”

However, the decision to dissolve a marriage triggers a complex legal process that can have a particularly profound impact in old age. This is because there is a lot at stake, especially when it comes to retirement provision.

Effects on old-age and survivors' insurance (1st pillar)

In Switzerland, people become entitled to benefits from old-age and survivors' insurance (AHV) upon reaching the age of 65. The so-called AHV pensions are calculated individually based on the average annual income during the period of employment and the number of contribution years (scale 44).

In the event of divorce, the AHV credits of married couples are split: the income earned by both partners during the marriage is divided equally to calculate the pension entitlement. This process can lead to an increase or a reduction in the individual pension, depending on how the income was distributed during the marriage.

Example: Monika (61) and Albert (63) have lived a traditional division of roles. Albert has provided most of the financial resources (an average of around CHF 100,000 per year), while Monika has mainly taken care of their children and the household. Monika also earned a small amount of additional income (around CHF 20,000 per year on average). Now the couple want to divorce.

The spousal income splitting system stipulates that the income earned by both partners during the marriage is added together and then divided equally. In the case of Monika and Albert, this results in a joint average annual income of CHF 120,000 (CHF 100,000 + CHF 20,000). After splitting, each partner is retroactively credited with a notional income of CHF 60,000 for each year of marriage.

This represents a considerable advantage for Monika. Instead of having a modest income of CHF 20,000 per year taken into account in her pension calculation, which would have resulted in a monthly AHV pension at the lower end of the scale, her taxable income increases significantly. Albert, on the other hand, must expect a lower pension than originally anticipated. This is because the splitting reduces his annual income of CHF 100,000 to CHF 60,000, which slightly reduces his expected pension. However, it is also important to note that the splitting is carried out by the compensation offices at the time when both spouses reach the reference age.

When calculating pension entitlements from the first pillar, there is another point to note in connection with divorce: married couples receive a maximum of 150 percent of the maximum AHV pension between them. If all contribution years have been paid, this amounts to a maximum of CHF 3,780 per month (as of 2025). However, if the spouses divorce, an individual pension is calculated for each person, which can amount to up to CHF 2,520 each if all contribution years have been paid in full. Together, the parties now receive more (CHF 5,040) than if they had remained married. However, the actual payment depends heavily on the individual contribution history. For this reason, there are now spouses who do not actually separate but who, based on the considerations outlined above, enter into a “sham divorce” in order to obtain a higher individual retirement pension.

Pension fund (BVG) and vested benefits

Another key aspect of divorce is the division of occupational pension benefits (2nd pillar). Here, too, the basic principle applies: the BVG assets accumulated during the marriage are divided equally between the spouses, regardless of who earned them. The spouses may deviate from the principle of equal division in an agreement on the consequences of divorce or even waive pension equalization. However, this is only possible if adequate retirement and disability provision is guaranteed for both spouses.

To briefly outline this, let's return to our initial example with Monika (61) and Albert (63). During the marriage and up to the time the divorce proceedings were initiated, Albert accumulated pension fund assets of CHF 340,000. Monika, on the other hand, has pension fund assets of CHF 45,000. Upon divorce, the two entitlements are added together, resulting in a total of CHF 385,000. Each spouse is now entitled to half of this amount, i.e. CHF 192,500. Albert's pension fund must therefore transfer a compensation amount of CHF 147,500 to Monika's pension fund.

It should also be noted that if the spouses have made an early withdrawal from their pension funds to purchase their own home, they may be required to repay the early withdrawal to the relevant pension fund. This is particularly the case if the property is sold to a third party upon divorce. This too must beconsidered and clarified before the divorce is finalized.

A special case also arises if one or both spouses have already reached retirement age and are therefore entitled to a pension. In this case, the law provides that the court shall decide on the division at its discretion. In doing so, it shall take into account, in particular, the duration of the marriage and the pension needs of the spouses. When making this division, the judge has considerable discretion within which to divide the accumulated pension fund assets between the parties.

Tax consequences

Divorces also entail changes in tax law. In Switzerland, married couples are taxed jointly – after de facto separation or divorce, they are taxed separately.

Since different tax rates apply to different life situations, the much-discussed and fundamentally unconstitutional marriage penalty may apply here.

The marriage penalty is particularly relevant when both spouses are employed. The taxable assets of both spouses are added together and taxed. Tax progression can mean that the spouses have to pay more tax together than if they were taxed individually. As a result, some couples decide not to marry in order to avoid a higher tax burden. This is also relevant in the case of divorce in old age. In many cases, both spouses are fully employed again in later life, as their children no longer require care. This leads to an increase in taxable income and the application of the marriage penalty described above. To avoid the marriage penalty, some spouses decide to divorce in order to obtain individual taxation and reduce their tax burden.

Furthermore, any maintenance payments to the divorced spouse are relevant for tax purposes, as these can usually be deducted in full by the maintenance debtor, while the maintenance creditor must pay tax on them in full as taxable income. However, equalization payments under matrimonial property law are not deductible and do not have to be taxed as income by the creditor. However, these payments are taxable as assets.

Finally, it should be noted that compensation payments from the division of pension fund assets are also taxed if the money is paid out and not transferred to another pension fund or to a vested benefits account.

Housing and property

Joint real estate is often an emotional and financial center of one's previous life. In the event of divorce, the question arises: Who stays? Who takes ownership of the property? Or will it be sold? Moving can be stressful, especially in old age. Many people want to stay in their familiar surroundings.

However, a single income or pension is often not enough to cover the mortgage granted by the bank (known as insufficient affordability). If the house is jointly owned by the spouses, it is either sold or one of the ex-partners takes it over – in conjunction with a payout of the other's share. In many cases, this requires debt restructuring or a new mortgage, which banks do not always grant to people over the age of 60.

Against this backdrop, spouses need to consider carefully how to deal with their joint property.

Adult protection and inheritance law aspects

Finally, divorce brings about changes in relation to adult protection and inheritance law. If one spouse is incapable of making decisions, for example due to an accident or illness, the other spouse is legally entitled to represent the incapacitated spouse in certain matters.

The right of representation includes, in particular, all legal acts that are usually necessary to cover maintenance needs, the ordinary administration of income and other assets, and, if necessary, the authority to open and deal with mail. For legal acts relating to extraordinary asset management (such as encumbering or selling real estate), the spouse who is still capable of making decisions must obtain the consent of the adult protection authority. If the spouses decide to divorce, this power is forfeited.

This situation can be mitigated by drawing up a lasting power of attorney in advance. In this document, the person who will later lose their capacity to make decisions can appoint a representative who will have comprehensive rights to represent them in both financial and medical matters. Incidentally, drawing up a precautionary mandate is recommended not only for single or divorced persons, but also for those who are still married, as it ensures that a close person can represent them in legal transactions involving the management of extraordinary assets. We recommend seeking advice from a specialist before drawing up a precautionary mandate.

In connection with inheritance matters, we would like to point out the following: While spouses have a legal right to inheritance and a compulsory portion, this expires at the latest when the divorce decree becomes final. If one spouse dies during ongoing divorce proceedings, this may also lead to the loss of compulsory inheritance rights under certain circumstances.

After divorce, it is therefore advisable to have any existing wills and inheritance agreements reviewed and, if necessary, reworded.

Conclusion

Divorce in old age is not an easy step – neither emotionally nor financially. The effects are manifold and involve a chain reaction. Only those who are aware of the legal and financial consequences can make good and sustainable decisions. That is why early and competent advice from specialists—lawyers, tax experts, pension advisors—is essential. As painful as the process may be, for many people, the break also means a new beginning—with new freedom, self-determination, and the opportunity to reshape their own lives.