Everyone enjoys the warm and magical feeling that comes with new love. People of all ages hope to experience the delights of finding someone to share their life with. For elder clients though, many have already spent many years with someone for which they cared deeply. For this group especially, finding someone new to spend the rest of their life with is an exciting and wonderful surprise.
Despite the wonder and excitement of an elder’s newfound relationship, remarriage in retirement is a pursuit not to be taken lightly. Too many seniors do not plan for remarriage prior to taking the plunge and suffer tremendous consequences as a result. With an estimated 50% of previously married seniors remarrying, premarital planning takes on a whole new importance – and typically requires the guidance of experienced legal professionals.
Considerations for the Elder Client Looking to Remarry
Many sources cite longer life spans as an inspiration for elder interest in remarriage; particularly so for elder men. There are many matters to address when an elder client desires to remarry – or even marry for a first time late in life. How will marriage effect current estate plans? What happens to established assets of each potential spouse? Will marriage create tax consequences? Will a new marriage create hurdles for future medical assistance? What about pensions, alimony, and survivor benefits?
First and foremost, prenuptial agreements are a must for elders who are financially endowed and engaged. These agreements protect the assets of each partner from confusion or misallocation after one’s death or divorce. Particularly, when a potential spouse has property that is meant to be inherited by a child, a prenuptial agreement protects the asset from traveling down an unintended course. These agreements help both partners understand the others’ intentions and expectations for where their property will go upon their death.
The key to these agreements is open communication, clarity, and candor. Everything from bank accounts to stocks, houses to socks should be discussed and memorialized in the document. A client would not want their families fighting over where their expensive wardrobe will end up, or whether their coin collection is included in “property” or “cash.” These principles apply to any aspect of estate planning, yet it is important for partners to understand, document, and agree to the full scope of the others’ expectations prior to the marriage.
Assets and Debts
Remarriage in retirement is complicated. Partners have established lives, property, accumulated wealth and debts. Individual debts may become joint debts following marriage. Comingling funds may make an entire account marital property. Homes and other properties may default to the new spouse at death – possibly creating an unintended inheritance to unanticipated beneficiaries. Each pitfall can be avoided, or at least addressed, with proper planning.
It is suggested that senior spouses maintain separate banking and credit accounts, but that creating a joint account for mutual expenses is a practical custom. In lieu of adding a new spouse to the home owned by one, the client should consider a life estate for the spouse instead. This tactic provides shelter for the spouse for life, while preserving inheritance for the owner-spouse’s children or other beneficiaries. Understanding jurisdictional rules on intestacy, spousal rights, and community property will help mitigate your client’s potential dangers of combining households through marriage.
There are many tax consequences to marriage. “Marriage penalties” are a hazard that many high earning couples face after tying the knot. Higher tax brackets may be reached when couples combine income. In the alternative, some lesser earning couples may benefit from the tax consequences of marriage. Couples should be prepared that the combined income of the pair may affect the tax treatment of their Social Security benefits as well.
Consulting a tax professional is an important step for your client’s preparedness. These experts can use tools to estimate the impact that marriage will have on the couple’s future tax burdens. Come April 15th of each year, it is best for the couple to know what they are facing when the IRS demands its share.
Estate Plan Effects
Neglecting to update estate plans could become a client’s worst nightmare. Particularly, when an elder client seeks a new marriage after divorce, current estate planning documents may be outdated and name the ex-spouse as beneficiary to certain items. Amending wills, life insurance policies, and employment benefits must be undertaken, if they had not already. The client must decide how they want their property to be disposed of at their death and can take measures to help avoid probate.
Changing ownership of property intended for the new spouse to survivorship is one example. Life estates, as discussed above, are another planning technique for designating post-death ownership. Clients must stay current on desired beneficiaries or risk the asset transferring to an unplanned recipient or leaving out an intended party.
Medical Benefits, Pensions, and Other Aid
Partners may lose Medicaid benefits or Social Security income payments upon marriage. Spouses may lose pension benefits or alimony payments. Later needs for long-term care are a significant concern for couples remarrying later in life. Combined assets may disqualify spouses for Medicaid assistance for long-term care. These limitations may result in the need for spouses to dispose of property that was intended to be passed down to children or loved ones. Adult children in college may also suffer from the loss of financial aid due to the added income of the new spouse.
Clients must be aware of these drawbacks and consider them sincerely before marrying. Considering these factors before it is too late can protect the senior pair from financial devastation down the line – and from receiving the loss of other financial benefits as an unexpected wedding gift.
Psychologists remind remarrying couples that their budding relationship affects more than just themselves and their adult children. Tensions can arise from other family members and friends from the previous marriages, too. Often, these friendships do not survive the new relationship. Loyalties to one spouse or the other may pose too difficult a position for friends to take on. Personality conflicts with the new spouse may create distance or hostilities. While not a legal point per se, it is helpful for clients to be prepared for the full ramifications of their decisions. This preparedness can help avoid distractions at a time when focus should be paid to estate planning and other legal tasks to ensure their desires are carried out as intended.
Before marriage potential spouses should talk finances – covering debts, cosigning arrangements, assets, property, etc. The pair must be aware of what they may be getting into – prior to taking the legal plunge into marriage and potential acceptance of the other’s financial obligations. Reviewing credit reports together is a useful tool in looking into the financial habits of a future spouse. Working with an estate planning attorney will help give couples peace of mind regarding the future of their assets.
Remarrying at a later time in life has a slew of benefits and challenges. Being proactive about addressing the legal implications before they become major concerns, and advising clients on what considerations to discuss, will take a load off the newlyweds’ future wellbeing. Elders should be encouraged to seek out the expertise of tax planners and estate planning attorneys before they head to their local clergyperson or courthouse.