Marriage Later in Life Tricky for Estate Planning

AFTER HER HUSBAND of 57 years passed away, Cathleen Bachmann's 80-year-old mother, Ruth, never thought she would remarry. It didn't take long, though, before an old friend she had known since kindergarten began courting her from another state. They started dating and soon her new beau decided to move to Michigan to be with her. About a year after her father died, Cathleen got a call from her mother saying she was going shopping for a wedding dress. (Names have been changed due to privacy concerns.)

Before the big day, Cathleen insisted that the couple sign a prenuptial agreement. "My father would have never forgiven me," she says, if she let her mother marry without one. Her parents had considerable assets and Cathleen worried that whoever was after her mother was after her money. "I knew it had to be done. If she predeceased him, because of our state law, I did not want him to inherit," she says.

Welcome to the new singles scene. Today, more and more seniors are finding love whether via a glance across the nursing home activity room or at the local senior citizens mixer. With the average life expectancy in the U.S. today at about 78 years, up from 70 in 1960, according to the National Center for Health Statistics, people are living longer and healthier lives than ever before. And that means more folks are rediscovering love later on in life.

But what can be exciting and romantic for an older couple can be nerve-wracking for families, who have hopes pinned to an inheritance or simply expectations about how money will be handled by a surviving parent. The issue here? Once married, a spouse will automatically inherit a deceased partner's estate — unless steps are taken to prevent that.

Marriage at any age means a marriage of finances. But the fact that older folks are likely coming into a second or third marriage with adult children, assets, a house, a 401(k) and perhaps failing health makes a trip to the altar significantly more complicated. In fact, the legal implications can get so thorny that many older couples opt not to get married and instead just live together. (Some worry about Social Security benefits being threatened if they remarry, but if you remarry after age 60, you can still collect benefits on your former spouse's record.)

"A remarriage can create a lot of family discord and distrust," says Sally Hurme, an attorney at AARP. "You've got to take legal steps to determine how it is you want your money to be distributed."

How best to do that? Through the use of a will, a prenup and oftentimes, a trust. Click here for more on how to create a will. Here's what you need to know about the other tools:

Prenups

Typically, when two people marry, their first obligation is to take care of their spouse. But that's not necessarily the first priority for folks getting married later in life. Most seniors with disposable income want to leave at least some of their assets to their kids.

A prenup allows a couple to identify which assets belong to whom during their marriage as well as in the event of a divorce. It works to keep spouses' assets separate, something estate-planning attorneys and financial planners advocate older couples do. "The prenup is a wonderful tool while the couple is living," says Craig Berman, an estate-planning attorney and CPA in Maryland. "It dictates who owns what and it clarifies the separation of assets." But it should be used in conjunction with a will and other estate-planning tools, like a trust, he says.

What happens without a prenup? While the laws are particular to each state, most states rule your spouse is entitled to about one-third of the estate, called the elective share. (The precise amount varies by state.) So if you leave your spouse less than one-third of your estate in a will or otherwise, he or she can get it anyway. Let's say an older couple marries. Both spouses have children from previous marriages. The husband has $3 million in assets and the wife has almost nothing. If he dies first, she is entitled to a big piece of his estate — roughly $1 million. Whether she needs that money to live or not, she's entitled to it — and it can ultimately end up with her children — a scenario ripe for family friction, especially if the husband's children were expecting to inherit his entire estate. In that case the couple can waive their right to the elective share in a prenup.

It's important to note that a prenup is not an estate-planning tool in itself, and does not necessarily take precedence over a will or trust. But it is an enforceable contract that can be crucial when it comes to the distribution of assets once a spouse dies.