When two people marry later in life, there are more items to sort through than just wedding gifts. Marriage between two people with longer histories involves important decisions concerning finances, children, assets, housing, retirement and more. Here are five topics you will want to take up with your potential spouse right away to ensure your best financial interests as individuals and as a couple are protected in your new union.
1. Combining Finances After a Marriage
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 your finances, especially when one partner is a spender and the other is more thrifty.
If either partner has young children from a previous relationship, this will also introduce a set of issues to discuss, such as the payment or receipt of child support and possibly alimony.
Some smart planning can help you ease this transition. Here's some advice from the Financial Planning Association and the American Institute of Certified Public Accounts you can use, preferably before walking down the aisle:
- Discuss each other's credit histories by reviewing credit reports and scores together
- Determine one another's indebtedness and find out each other's comfort levels with debt
- Reach an agreement about how to share paychecks, savings and bill payments
- Set up one joint banking account and an individual account for each partner (or whatever arrangement works best for both of you)
- Determine who will be the primary breadwinner or if you will both be contributing equally
- 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
2. Updating Tax Filing Information
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, any 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 your spouse dies and you remarry before the end of that tax year, you can file a joint return with your new spouse. (To learn more, read The Tax Benefits Of Having A Spouse and Happily Married? File Separately!)
3. Estate Planning With a New Spouse
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 die. This planning is especially important when children are involved because it ensures they will receive what is rightfully theirs. Keep in mind that state laws regarding estates vary.
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) with a lawyer. In a remarriage, the prenuptial agreement can help determine what will be left for each of your 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 or not a trust is affected 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.
Finally, 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. Updating Name With Social Security Administration
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 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. (For related reading, see: How Social Security Survivor Benefits Work.)
5. Reviewing Medicaid Benefits
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 your benefits.
The Bottom Line
A marriage can affect every aspect of your financial life. Sit down as a couple to learn more about each other's present financial situations and future goals, then talk to 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. (For more, see: Relationship Money Matters.)