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 intended spouse right away to ensure your best financial interests as individuals and as a couple are protected in your new union.
- Older couples who plan to marry should discuss finances, children, assets, housing, retirement, and more before their wedding.
- When combining finances, it's best to be open about everything from your degree of indebtedness to investment strategies and retirement plans.
- Be sure to update your tax information, determine your filing status, and update your name and benefit status with the Social Security Administration (SSA).
- Complete estate planning to see that your families' financial needs are met after you die, and update beneficiary information for wills, life insurance policies, and the like.
- Consider creating a prenuptial agreement to ensure that your financial assets are protected in the event of a divorce and to clarify property division when one of you dies.
1. Combining Finances After Marriage
Older couples have had more time to become accustomed to their own 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 finances, especially when one partner is a spender and the other is more thrifty—or when one partner has considerably more resources than the other.
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. Even when there are adult children, there are issues of inheritance to clarify.
Some smart planning can help you ease this transition. Here is advice from the Financial Planning Association and the American Institute of Certified Public Accountants that you can use, preferably before walking down the aisle:
- Discuss each other's credit histories by reviewing credit reports and scores together.
- Determine each partner's indebtedness and comfort level 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 whichever arrangement works best for both of you).
- Determine who will be the primary breadwinner or if you will both be contributing more or less 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 if you are not yet retired.
- 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/college 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." Make sure each of you straightens out any tax issues with a previous spouse before remarrying. If your spouse dies and you remarry before the end of that tax year, you can file a joint return with your new spouse.
3. Estate Planning with a New Spouse
Estate planning is imperative. This organization of your property is a means to see that your families' financial needs and goals are met after you die. This planning is especially important when children from previous relationships 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, including your medical powers of attorney or healthcare proxies. 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. In a marriage, property and income usually become community property, even if held in one person’s name. A prenuptial agreement is a written contract (to which both parties voluntarily agree) that outlines the terms and conditions associated with dividing up financial assets and responsibilities if the marriage dissolves. A prenup is especially important if you and your intended have large income or resource disparities.
The agreement should be discussed with a lawyer before the marriage (since state laws don't always recognize postnuptial agreements). 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. However, a prenup cannot touch child support, visitation rights, or custody. Additionally, since a prenup is a financial tool, it cannot be used for nonfinancial matters. You can’t make your spouse promise to make lasagna every Friday night, for instance. And you can’t use a prenup to designate who will change their name or to make agreements about children.
A prenup can stop your spouse from challenging your will or any existing trusts. 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 a child support agreement, which could make the trust less flexible. Some trusts, such as a qualified terminable interest property trust (QTIP), offer both support for your spouse after your death and protections for your first family. A QTIP provides income for your spouse but ensures that when your spouse dies, the assets inherited from you will go to the children from your first marriage or other heirs you choose rather than to your spouse's heirs.
Finally, AARP advises those marrying later in life to have separate wills rather than a joint will. Having separate wills eases potential complications with the future distribution of property, especially considering that life circumstances can change throughout the years you are married.
Many of the same details that go into drafting a prenup are required for an estate plan; so, it is a good way to ensure you are providing for your spouse and managing your children’s inheritance at the same time.
4. Updating Names With the Social Security Administration
Newlyweds should contact the SSA 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 you're disabled), you will still receive benefits based on your former spouse's income history.
5. Reviewing Medicaid Benefits
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 marriage could impact your benefits.
The Bottom Line
Marriage can affect every aspect of your financial life. Sit down as a couple to learn more about each of your present financial situations and future goals and then talk to an attorney. Consider keeping most assets and property separate to minimize complications, especially when you have heirs.
If you didn’t make a prenup but are thinking that it would have been a good idea, you can still create a postnuptial agreement. While a postnup may be considered less valid than a prenuptial agreement, some legal documentation is better than none. Most important, don't end your discussion at the aisle; maintain ongoing discussions about finances throughout your married life, for richer or for poorer.