Putting the 'aged' in engaged: Financial tips for late marriages
April 16, 2012
When an older couple walks down the aisle, they typically carry with them a host of financial holdings and habits from earlier in life. But these things can soon lead to friction in the relationship if they aren't handled before the union is official.
"Older couples who marry tend to have financially complex lives, and this has ramifications when they merge later in life," says Lauren S. Klein, CFP, of Klein Financial Advisors, Inc. in Newport Beach, Calif. "When a couple is young and marrying for the first time, it's like a start-up that grows organically, whereas older newlyweds represent the merger of two established businesses."
If you're thinking about tying the knot later in life, consider these seven tips for preventing money issues from becoming a problem in your relationship:
1. Protect assets
You may have already spent years accumulating financial assets such as real estate, retirement accountsand annuities, so preserving those assets should be a top priority.
"Educate yourself about property issues for your state," says Klein. "Some states are community property and married couples can own property either jointly or separately. Determine upfront if you want to merge or maintain separate property and then title the property accordingly."
For assets such as retirement accounts, decide if you want your beneficiaries to include your new spouse and update them as needed.
2. Get a prenuptial agreement
To ensure that your assets are protected and no questions linger between you and your new spouse, get everything in writing. Use a premarital agreement and revised will to cover issues like who inherits the house if one spouse dies.
"Remember, the upside of premarital agreements is that they help you outline what assets you'll share with your new spouse," says Klein. "For instance, you could agree to use (the sale of) separate property as a down payment on a new home."
If it seems sensible, you can also share the terms of your prenuptial agreement with your children from previous relationships to help them know how the new marriage could affect them down the road.
3. Discuss outstanding debt
Debt from either partner can be a drain on your financial life together, so it's important that you and your future spouse agree on how existing and future debt will be handled. It's key to disclose anything you owe on credit cards and other loans at this point.
"I suggest coming to an agreement before marriage regarding your philosophy and values around debt," says Klein. "Iron out when, why and how you expect to use debt in the future, and make plans to pay off existing debt."
Reviewing your credit reports together can prevent any unwanted surprises when it comes time to jointly apply for credit later.
4. Analyze benefits
If you both of you are working and have health insurance, carefully review each plan in order to decide on the best choice. Pay close attention to any medical issues either of you have and the coverage offered by each carrier in those areas.
Also consider purchasing long-term care insurance for you both, which can help ease the burden on one partner if the other falls ill.
5. Examine tax implications
Consult an accountant regarding the tax implications of your union and create a tax plan. Singles who have long been accustomed to paying their taxes individually may be in for a shock when they get married.
"Keep in mind that taxes are often higher when you unite, because the second income is taxed at a higher marginal rate," says Klein.
6. Talk about retirement
Agreeing on what retirement looks like and when and where it will occur can help you plan for a harmonious financial future with your new spouse.
If your partner's idea of a fulfilling retirement is traveling the globe -- and yours involves tending to your garden and spending time with family -- it's best to discuss exactly how that will work before the wedding.
7. Get help
While it may not seem romantic, putting together a written plan with the help of a financial planner can give you a clear road map for handling finances in your new marriage.
A financial planner can also be the voice of reason when emotions fly. "Money is often equated with power or love," says Klein. "A financial planner can remove the emotion and help you make informed and rational decisions."