If you’re age fifty or older and are thinking of tying the knot, it’s smart to plan ahead. Financially, there’s often plenty to be gained:
- You can take advantage of economies of scale by combing your two households into one.
- Many married couples enjoy income tax benefits, paying less by filing jointly than they would if unmarried. (If both spouses are high-earners, however, a marriage penalty may apply.)
- When it comes to estate and inheritance taxes, being married is clearly a plus. You can leave an unlimited amount of money and property to your spouse with no estate taxation.
- Under Social Security and most pension plans, spouses have benefits that domestic partners do not.
Tip #1: Discuss spending habits, budgets and goals. It’s important to examine spending habits in the beginning to avoid frustrations down the line. For example, one of you might be conservative while the other is more of a spendthrift. Without discussing these issues upfront, you’re likely to have ongoing disagreements about spending and saving. Work together to find common ground and to establish realistic budgets for both of you. Along with budgeting your expenses, you should set retirement goals and budget your savings, as well.
Tip #2: Don’t shy away from a prenuptial agreement. Don’t think of it as prearranging your divorce as much as a form of writing your will. If you don’t have financial arrangements made in advance, the state gets to make them for you. If you’ve been married before and have children and/or grandchildren, a prenuptial agreement is essential to ensuring that the property you wish to pass on to them will do so. Even if you’re getting married for the first time, you’ve likely accumulated significant assets by this point in your life. So in the event this marriage doesn’t work out, you should plan for how to handle those resources.
Tip #3: Discuss estate planning with your family. Estate planning is essential if you have children from a previous marriage. Otherwise, your entire estate could pass to your new spouse and not to your own children. Have candid conversations about your estate planning and prenuptial agreement with your adult children and your new spouse. Adult children are sometimes wary of their parent getting remarried because they are concerned about how it will affect their inheritance. These transparent conversations will ensure that everyone is on the same page.
Tip #4: Consider your new spouse’s debt. Debt can be a significant issue in second marriages. Both partners should be upfront about how much you each owe before marrying so you can decide together how you’ll handle any debt that’s still outstanding. It’s a good idea share your credit reports, as well.
Tip #5: Put your end-of-life wishes on paper and discuss them! Without an advance health directive that spells out your wishes regarding end-of-life care, there’s no guarantee your new spouse will be able to make medical decisions on your behalf. It’s important to be very clear about your wishes and to put them in writing so your new spouse and your adult children don’t end up at odds over your care.
Marriage at any age can affect every aspect of your financial life. Sit down as a couple to learn more about each other's present financial situations, and review a list of assets, debts, and future goals, and then talk with your financial advisor and your attorney.
About FAI Wealth Management, Inc.: Located in Columbia, Maryland, FAI focuses on helping clients create the financial future they desire by protecting their wealth, making the most of their assets, and planning for life's uncertainties. The firm combines fee-only, fiduciary-driven guidance with highly personalized, consultative financial planning and investment services that enable individuals, families, and businesses to navigate complex life transitions. Founded in 1987, FAI currently manages more than $330 million in client assets nationwide. For more information about FAI Wealth Management, please visit the website at http://www.faiwealth.com or call 410.715.9200.