Whether due to gray divorce or early widowhood, retirement planning increasingly needs to include a new partner. And often, it couldn’t come at a trickier time.
Remarriage rates among those 55 and older increased by 15 percentage points between 1960 and 2013, according to Pew Research Center. And during the period from the mid-1990s to early in this decade, the share of those who had married two or more times rose only for women over 50 and men over 60, Census Bureau data show.
For many older couples, these unions are taking place just as long-term pension decisions need to be made, Social Security checks are starting and estate plans are being drawn up.
“Remarriage later in life comes with its own set of complications,” said Joshua Rubenstein, national head of the trusts and estates practice at law firm Katten Muchin Rosenman. While younger people may find it easier to broach the topic of a prenuptial agreement with a partner by presenting it as something they have to do to satisfy parents, that excuse is typically gone when partners reach their 50s, he said.
“It’s somewhat easier when you’re young to say, ‘Honey, I love you, but I have to do this,’” Rubenstein said. “When you’re getting married in your 50s or 60s, it’s all on you.”
Financial lives are also typically much more complex at later ages, though there can be a saving grace or two.
“Neither spouse at this point probably will make a case for including child support or alimony,” in agreements, said Rubenstein. “It can be a fairly short, simple prenup that basically says what each partner brings into the marriage remains theirs” if the marriage ends.
But blending financial lives is about more than just a prenup, so what else should couples be talking about before heading down the aisle?
Think of it in three phases, suggests John Vento, an accountant, financial planner and author of “Financial Independence: Getting to Point X.”
When he first meets with engaged couples, he goes through each set of finances separately and then presents a combined net worth statement for the couple, as well as an income and expense statement showing each partner’s total income sources and monthly expenses. These are difficult numbers to get people to disclose, he acknowledges, but he urges couples to get it all on the table before the wedding to avoid nasty surprises later.
Use these numbers as the basis for how to split the common living expenses. Some couples, for example, split expenses according to income. So, if a wife makes 60% of the household income, she pays 60% of the joint expenses.
If both spouses own homes and they decide to rent out one and live together in the other, they should have a conversation about how that will affect each partner’s finances.
The spouse moving in may have no problem helping with reasonable expenses like utilities, but expecting someone to pay half the mortgage and property taxes will tend to generate expectations of building equity in the property.
“As you’re collecting this information you also have to be aware of what will change once the marriage begins. There may be alimony now that ends with a new marriage, so that needs to be accounted for,” Vento said.
Next, consider the tax and benefit consequences of remarriage, he said.
A new marriage could affect financial aid and scholarship eligibility, tax credits and Social Security survivor benefits, so it’s imperative to lay out all those possibilities, he said.
“I hate to make marriage only a financial thing, but if it’s going to cost tens of thousands of dollars in lost credits or benefits, (delaying marriage) may be something the couple wants to consider,” he said.
Prepare a hypothetical joint return — or hire a tax adviser to do one — to see how combining financial lives will affect both partners, he suggests.
Finally, look at estate planning.
“This is where most older couples have the biggest concerns,” said Vento.
Adult children worry about their inheritance and how the marriage may complicate health care directives and plans, both advisers said.
Estate documents such as trusts or wills and health care directives can give all parties some comfort on those issues.
Long-term care issues, however, aren’t so easily resolved. State laws vary, but spouses generally are on the hook for nursing home care for their loved one, and must spend down most of their assets to qualify for Medicaid coverage.
There are situations where spouses have effectively fought this obligation through a longstanding prenup, Rubenstein said, but it’s critical to discuss this with a qualified attorney in your own state who is experienced in elder law.