When two people marry or remarry later in life, there are more items to sort through than just wedding gifts. Marriage between two people with significant histories involves important decisions concerning finances, children, assets, housing, retirement and more. Here are five topics that you will want to discuss with your potential spouse right away to ensure that your best financial interests, both as individuals and as a couple, are protected in your new union.
Older couples have had more time to become accustomed to their personal habits and money management styles. They've also had more time to accumulate significant assets. This can make it a little harder to merge, especially when one partner is a spender and the other is thrifty.
Some steps can help you ease this transition. Here's some advice offered from the Financial Planning Association and the American Institute of Certified Public Accounts you can use walking down the aisle:
- Discuss each other's credit histories by reviewing credit reports and scores (Get a look at the various components and considerations of the personal and financial data that go into this dossier in Consumer Credit Report: What's On It.)
- Determine one another's indebtedness, and find out each other's comfort levels with debt
- Reach agreements about how to share paychecks, savings and bill payments
- Set up one joint banking account and an individual account for each partner
- Determine who will be the primary breadwinner
- Discuss investment strategies and styles, such as whether you are aggressive or conservative
- Figure out what level of savings you'll want to have as a couple
- Discuss what you envision for retirement
- Talk about where you plan to live now and in the future
- If children from a previous marriage are in the picture, discuss how you will handle everyday child expenses and school tuition
- Prepare a formal agreement with any ex-spouses about the children
The Internal Revenue Service (IRS) advises newlyweds to ensure that the names on their tax returns match the names registered with the Social Security Administration (SSA). If not, your tax refund could be delayed. Also, consider whether it makes more sense financially to file a joint tax return or to file as "married filing separately", and make sure to straighten out any tax issues with previous spouses before remarrying. In the event that your spouse dies and you remarry before the end of the tax year, you can file a joint return with your new spouse. The filing status of your deceased spouse for his or her final return is married filing separately. (To learn more, read The Tax Benefits Of Having A Spouse and Happily Married? File Separately!)
3. Estate Planning
Estate planning is imperative This organization of your property is a means to make sure your families' financial needs and goals are met after you've died. This planning is especially important when children are involved or when a former spouse has died because it ensures that they will receive the transferred property. Keep in mind that state laws regarding estates vary. (For more on this topic, read Getting Started On Your Estate Plan, The Importance Of Estate And Contingency Planning and Estate Planning Basics.)
Make sure to update your respective powers of attorney. Additionally, you may want to change your beneficiaries for the following items:
- life insurance policies
- retirement accounts
- investment funds
- any other financial accounts
Many financial planners, estate planners and accountants also advise considering prenuptial agreements when you marry or remarry later in life. A prenuptial agreement is a written contract that outlines the terms and conditions associated with dividing up financial assets and responsibilities if the marriage dissolves. The agreement should be discussed prior to the marriage (since state laws don't always recognize postnuptial agreements) and with a lawyer (because of the assets that are being brought into the marriage). In a remarriage, the prenuptial agreement can help determine what will be left separate for respective families to inherit if you divorce or when you die. It can also stop your spouse from challenging your will or any existing trusts. (Learn more in Marriage, Divorce And The Dotted Line.)
Whether a trust is affected or not will depend on who the beneficiary or beneficiaries are and how the trust was set up, such as whether it was within the context of a divorce agreement or child support agreement, which could make the trust less flexible. Some trusts, such as a qualified terminable interest property trust (QTIP), offer protections for your first family. They ensure that if a spouse dies, his or her assets will go to the children from his or her first marriage rather than to the new spouse. (For more on trusts, read Should You Put Your Faith In A Trust? and Pick The Perfect Trust.)
Finally, the AARP advises those marrying later in life to have separate wills. This step is encouraged over a joint will because it eases potential complications with the future distribution of property, especially considering that life circumstances can change throughout the years you are married.
4. Social Security
The SSA advises newlyweds to contact it when a name change occurs to make sure earnings are properly reported. If marriage occurs after full retirement age and your Social Security benefit is less than half of your new spouse's, you can receive the Social Security benefit on your record plus an additional amount to bring you up to half of your new spouse's Social Security benefit. This will generally occur one year into the marriage.
Widows' or widowers' benefits aren't available to a spouse who remarries before age 60. If you remarry after age 60 (or after 50 if disabled), you will still receive benefits based on your former spouse's income history.
A marriage can affect benefits paid by Medicaid, a health benefits program for low-income individuals. Medicaid is based mainly on household income, so a person receiving Medicaid benefits who marries someone with a higher income could lose coverage. Check the eligibility rules for your state to learn how a marriage could impact Medicaid benefits.
A marriage can affect most aspects of your financial life. Sit down as a couple to learn more about each other's present financial situations and future goals, and then visit with an attorney. Consider keeping most assets and property separate to minimize complications, especially when you have heirs. Most importantly, don't end your discussion at the aisle: maintain ongoing discussions about finances throughout your married life, for richer or for poorer.