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Money March 2013

Dollar Sense

Getting Married Later in Life: Money Matters to Consider

By Teresa Ambord

In some states, you may be responsible for the medical and long-term care bills that your spouse accumulates...Some older couples make the decision to remain unmarried so they can avoid the possibility of having to assume this responsibility.

Combining finances at any age can be complicated. But getting married later in life generally means there are more assets as well as more generations of people to add to the mix, and that means more complexity. It helps if you and your future spouse have similar spending and saving habits and the ability to communicate easily about such things. Otherwise, it might be better to keep your finances separate and just agree ahead of time which of you will pay what expenses. Who buys the groceries, who pays the electric bill, and whether or not you really need the jumbo expanded channel cable TV plan… these are the daily decisions you may need to revisit frequently as circumstances change. But there are many bigger points you should carefully consider – before you tie that knot – possibly with professional help.

 

Social Security

If you are receiving benefits based on your spouse’s record (whether you are divorced or widowed) the amount you get may be affected when you remarry, especially if you are a woman.

  • Suppose you are a divorced woman. You may begin receiving benefits on your ex-spouse’s record once you turn 62 (if he is also collecting benefits at that time). Once you remarry, that ends. If your subsequent marriage ends for any reason, you might be able to go back and collect benefits on your previous spouse’s record if those benefits are higher than you could collect on your own. The details vary by your specific situation, so it’s best to contact someone at your Social Security office.
  • If you are widowed and you remarry before age 60 you will likely lose the rights to survivor benefits from your former spouse.
  • If you are disabled, the age threshold is 50. Remarrying after age 60 will not affect your survivor benefits.
  • Cohabiting couples are not eligible to receive each other’s Social Security benefits.

 

Pension Benefits

Before you marry you may want to find out if your pension offers the option to let spouses continue receiving monthly checks after the pensioner dies. Note: if you take this option, the payments you yourself receive may be smaller. For example, suppose your pension benefit under this option is $2,500 per month (instead of a maximum of $3,000 if you did not take this option). If you were to pass away, your spouse would continue to receive this same, reduced amount for his or her lifetime. Otherwise, while you could draw a higher amount now, when you die the pension ceases. This is generally only available to married couples, not cohabiting couples.

For certain employees, special rules apply:

  • Public employee. If you are the widow or widower of a public employee, remarriage may cause the loss of your pensions.
  • Military spouse. Widows or widowers of military personnel killed in duty may lose benefits if they remarry before age 57.
  • Federal civil servants. If you are the surviving spouse of a federal civil servant, you may lose benefits if you remarry before age 55.

 

Alimony

If you or your intended is receiving alimony from an ex-spouse, it will almost certainly end if you remarry and possibly even if you just live together.

 

Taxes

You’ve heard of the marriage penalty. Under the former Bush tax cuts, the marriage penalty was eased by giving married people higher standard deductions, and by manipulating the two lower tax brackets.

You’ve probably heard much talk that the new “fiscal cliff law” – The American Taxpayer Relief Act of 2012 – would change all that. Fortunately, that did not happen. The good news is, the marriage penalty relief that was implemented under President Bush has now been made permanent. Even so, there may be tax implications that are less obvious, so it’s a good idea to talk your plans over with your financial advisor.

 

Health Insurance

A good employer-sponsored health plan is hard to find. So if you do not have coverage now or if your future spouse has better coverage than you do and you can participate in it, the cost savings could be huge. Health expenses are one of the biggest obstacles many retired folks face. Also find out if your future spouse’s plan allows for health insurance coverage after retirement, for the employee and the spouse.

 

Other Employer Benefits

You may also be able to obtain coverage for dental needs, disability, long-term care, and employer-sponsored life insurance.

 

Long-term Care

In some states, you may be responsible for the medical and long-term care bills that your spouse accumulates. That’s why it is smart to have long-term care insurance in place, to protect your assets. You can check out the possibilities on longtermcare.gov, or ask your insurance agent for details. Some older couples make the decision to remain unmarried so they can avoid the possibility of having to assume this responsibility.

 

Estate Planning

Even if you have a will leaving every penny to your children or other chosen heirs, in most states your spouse will automatically get part of your estate (generally one-third to one-half). If you see this as a problem you may be able to bypass it with a pre-nuptial agreement, which states that neither of you will draw from the other’s assets when one dies. Or you can establish a trust that will give your surviving spouse part of your estate and preserve the rest for your heirs. Ask your attorney for details.

 

Real Estate

Whose house will you live in? The two of you may decide to live in the home you own, and presumably you will consider it yours together. But what if you die? Did you plan for your children to inherit the house? If you have arranged for your children or someone else to inherit the house after your death, your spouse would in essence, be evicted. Assuming this is not your intention, you can establish a life estate for your spouse that would entitle him or her to live in the house for life. After your spouse passes away, the house will pass on to your intended heirs. While there is time, be sure your heirs understand your wishes. The last thing you want is for your spouse’s grief at losing you to be compounded by family disputes.

 

College Assistance for Your Kids

Chances are your children are beyond college age. Then again, in this economy you may be raising your grandkids. If your kids or grandkids are receiving financial aid for school based on your income, check with the school to find out how this could affect eligibility.

Marriage is never easy, but marriage after “a certain age” brings a host of issues that you may not have faced the first time around. You may wish to hire an estate planner who will look after your interests as well as your future spouse’s and any heirs the two of you may have. That can go a long way to eliminate uncertainties about your financial future. Also go to elderlawanswers.com for more information.

 

Teresa Ambord is a former accountant and Enrolled Agent with the IRS. Now she writes full time from her home, mostly for business, and about family when the inspiration strikes.

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