Does it make financial sense to marry a second time?
Recognizing that average life expectancy has increased over time, the possibility that you might be considering marriage more than once in a lifetime also becomes more of a reality. Many older clients faced with choices regarding late blooming relationships — whether from death or divorce — are confronted with a decision, should they remarry or should they continue the new relationship without marriage.
Religious and personal beliefs can enter into it. So can family ties, and the financial effect or remarrying or not. Without competent financial and legal advice it is difficult to make an informed decision one way or the other.
Financial Planning. Before deciding whether to merge finances, those who are considering remarriage should conduct a thorough review of their financial plan including assets and income. Marriage brings with it some responsibilities and without a full legal and financial review there could be surprises.
Prenuptial and Postnuptial Agreements. Especially for those considering remarriage later in life who have established a business or accumulated assets in their own name, prenuptial and postnuptial agreements are valid considerations. This is especially true where either party has children by a prior marriage. A “prenup” is entered into before marriage and a “postnup” after. Marriage does not necessarily end written agreements and they can be continued throughout the marriage.
Note that if one consideration is whether assets can be insulated from Medicaid spenddown, the government does not recognize either prenup or postnup agreements in connection with this program but there are some protections for spouses both in the Medicaid rules and in Medicaid planning. Medicaid does not pay for personal care in Pennsylvania or to independent living.
In very basic terms a well drafted prenup or postnup would typically (although not always depending on the circumstances) state that each party has acquired certain assets that belong to himself or herself alone, that each party is free to designate assets to their children, and that neither will claim against the other’s estate. It also addresses the status of assets acquired during the marriage and lists assets acquired before the marriage. There needs to be full and fair disclosure. Other than in the Medicaid healthcare field as described above Pennsylvania does recognize valid prenup and postnup agreements.
Some advantages to being married. If you are married and your spouse has healthcare insurance through work or
through a retirement plan, you likely can be covered under his or her plan. This may be a tremendous advantage.
If your spouse dies and leaves assets to you, the rate of Pennsylvania inheritance tax is 0%. If you remain single any assets you inherit would be at the rate of 15%.
Your new spouse may have veteran’s benefits that would accrue to you depending on his or her status.
IRA and 401(k) rollover status for spouses is very much preferred and spouses have more flexibility than other beneficiaries in inheriting IRA’s.
If your new spouse has higher Social Security than yours, you can “step up” to your spouse’s benefit if he or she dies before you.
Some disadvantages to being married. If you currently have benefits from your prior spouse whether through a property settlement agreement in divorce such as alimony or through pension or veteran’s benefits rights, or through his or her health insurance you might lose these by remarriage. You should check or consult before remarriage.
If you have been receiving Social Security under your deceased spouse’s benefit and you remarry before age 60 (before age 50 if you are disabled), you will likely lose the prior benefit. Remarriage after age 60 does not affect your benefit.
Termination of the relationship — marriage vs. cohabitation. Although it is more difficult in most circumstances to terminate the relationship if you marry as opposed to living together, it should not be assumed that cohabitation is without concern. For those who remarry, divorce is not easy. A second divorce or a divorce after having been a widow or widower adds to the emotional toll. However, marriage can offer some asset protection that cohabitation might not and asset titling is important in either event.
Obviously this is not the whole story. For more, seek help from your elder law and/or family law attorney and, where this applies, also from your financial planner. It can be complicated.
Janet Colliton, Esq. is a Certified Elder Law Attorney and limits her practice to elder law, retirement and estate planning, Medicaid, Medicare, life care and special needs at 790 East Market St., Suite 250, West Chester, Pa., 19382, 610-436-6674, colliton@ collitonlaw.com. She is a member of the National Academy of Elder Law Attorneys and, with Jeffrey Jones, CSA, cofounder of Life Transition Services LLC, a service for families with long term care needs. Tune in on Wednesdays at 4 p.m. to radio WCHE 1520, “50+ Planning Ahead,” with Janet Colliton, Colliton Elder Law Associates, and Phil McFadden, Home Instead Senior Care.
Note that if one consideration is whether assets can be insulated from Medicaid spenddown, the government does not recognize either prenup or postnup agreements in connection with this program but there are some protections for spouses both in the Medicaid rules and in Medicaid planning. Medicaid does not pay for personal care in Pennsylvania or to independent living.