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 accounts
and 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."