Things to Consider When You're Planning to Get Married Later-In-Life
Finding love later is a wonderful blessing. Getting married later in life can be more complicated. Marriage, when spouses have significant histories, involves more decisions about finances, estate planning, healthcare planning and housing. A 2nd marriage, with children, can increase the complications. One way to avoid grief later is to make sound financial decisions in advance.
Here are four things you need to address before you get remarried:
You each have developed your own habits and priorities about money which makes decisions about spending critical to ensure future harmony. You have had time to accumulate significant assets which makes decisions about merging accounts and estate planning a bigger issue. And if either partner has children, there are additional estate planning considerations. You will have additional choices for federal and state income taxes.
Some important steps to take are:
• Discuss each other’s credit histories and credit scores
• Share records on debt, including balances, payments, how many payments remain
• Determine how to handle your income; how much goes to joint expenses, etc.
• Discuss how you will manage the assets each brings into the marriage
• Seek advise from an accountant on how to choose your income tax filing status
ACTION STEP – Record you agreements on finances in a Prenuptial Agreement.
2. ESTATE PLANNING
Estate Planning doesn’t just record how to handle your assets at your death, but makes provisions to follow in case you are unable to personally manage your own finances. Many people want to keep what they’ve accumulated prior to their second marriage as separate assets and at their death pass those assets on to their own children. If this is what you want, you must ensure your will reflects your wishes. If you die without a will, state law prevails and your spouse is likely to inherit your assets.
Often couples choose to make special provisions in case the owner of the residence predeceases the non-owner so that the surviving spouse can remain in their home for some period of time to avoid leaving that decision to the owner’s children.
Important steps to consider:
• Make a complete inventory of everything you own, including personal property such as furniture and jewelry, and specify who will inherit each item.
• Select a person to be your Power of Attorney and your Healthcare agent.
• Review your beneficiaries on all insurance policies and accounts to ensure they reflect your desires.
ACTION STEP – Create your will, power of attorney and healthcare directives.
3. HEALTHCARE: PLAN FOR THE WORST-CASE SCENARIO.
Healthcare is an important issue and increases in expense as people age. For some, Medicaid is expected to provide a significant part of their Healthcare plan. If the other partner has many assets at all, it could cause a problem.
Medicare and Medicaid laws are not affected by prenuptial agreements or other legal documents. Understanding how your healthcare insurance, state Medicare and Medicaid laws and your long term care insurance work is essential for you to navigate this area. At this stage in life, couples who are in long term marriages have had years to plan and prepare to maximize their options and provide as much protection as possible. Newlyweds must accelerate their actions to seek maximum options and protection.
Since healthcare costs increase exponentially the longer you live, it’s important to be prepared in the event that medical costs will cause one of you to run out of money and need Medicaid.
To qualify for Medicaid, both spouses must have limited assets. Many people try to get around this requirement by gifting money or property to their children; however, Medicaid has a “five year look-back rule.” This means when you apply, they will examine your assets for the last five years looking for any assets that have been transferred or placed in a trust. If they find such transfers, Medicaid will add those assets back into the calculations used to determine whether you qualify. You will not qualify for Medicaid until the five year look-back period is past.
ACTION STEP – Understand how healthcare rules apply in your circumstances and develop a plan for your protection
4. MAKE AN INFORMED DECISION ABOUT WHICH HOUSE TO LIVE IN
The Wall Street Journal states that the homes of Americans over age 65 constitute 33% of their net wealth. This is a significant asset and merits special attention. If you both own homes, the first decision is to decide which residence to live in. This will probably be based on location, how well the house and property fits your joint lifestyle and other characteristics of the house.
As you move on to financial aspects of the houses, you will consider the upkeep/maintenance, property taxes and whether the house has a mortgage. An often overlooked factor is taxes. Make sure you understand how the decision you make will affect your taxes when you’re deciding what to do with the additional property. The surviving spouse has 2 years after their spouse’s death to sell the house and claim the $500,000 exclusion; after 2 years the exclusion is $250,000. If the house was jointly owned and depending on state law and titling you can get a step up in basis. This means ½ of the gain accumulated up to the time of death will be tax free. This also works to reduce the profit upon sell.
ACTION STEP –Determine the tax impact of selling one of your homes.
Regardless of what decisions you make in these four areas, it’s a good idea to finalize these things with your future spouse before you get married and explain your intentions to your children. This can save a lot of misunderstanding and pain in the future.
Best wishes to those who are finding love in later life.