People of all ages hope to experience the delights of finding someone to share their life with. For elders though, many have already spent many years with someone for which they cared deeply.
Despite the 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 lawyers.
Considerations for the Elder Looking to Remarry
Longer life spans may account for increasing elder's interest in remarriage; particularly so for elderly men. There are many matters to address when an elder desires to remarry. How will marriage effect current estate plans? What happens to the assets of each spouse? Will marriage create tax consequences? What about pensions, alimony, and survivor benefits? Will a new marriage create hurdles for Medi-Cal qualification?
First and foremost, prenuptial agreements are a must for elders who are financially endowed. 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 being distributed in an unintended way. 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 transparency. Everything from bank accounts to stocks should be discussed and memorialized in the document. 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 community 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 with proper planning.
It is recommended that senior spouses maintain separate banking and credit accounts. Instead of adding a new spouse to the home owned by one, the elder should consider a life estate for the spouse. This strategy provides shelter for the spouse for life, while preserving inheritance for the owner-spouse's children.
There are many tax consequences to marriage. "Marriage penalties" are a hazard that many high earning couples face after marriage. 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 aware that the combined income of the pair may affect the tax treatment of their Social Security benefits as well.
Consulting a tax professional is recommended. They can use tools to estimate the impact that marriage will have on the couple's future tax burdens.
Estate Planning Effects
Neglecting to update estate plans could become an elder's worst nightmare. Amending wills and trusts, life insurance policies and employment benefits must be done. They must decide how they want their property to be disposed of at their death and can take measures to avoid probate.
Medi-Cal Benefits, Pensions, and Other Aid
Partners may lose Medi-Cal benefits or Social Security income payments (SSI) upon marriage. Spouses may lose pension benefits or alimony payments. Later needs for long-term care are a major concern for couples remarrying later in life. Combined assets may disqualify spouses for Medi-Cal 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.
Elders must be aware of these drawbacks and consider them before marrying. Considering these factors before it is too late can protect the senior pair from financial devastation down the line.
Before marriage, potential spouses should talk finances - covering debts, assets, property, etc. They 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. Working with an estate planning & elder law attorney will help give couples peace of mind regarding the future of their assets.