Challenges to Advising Clients in Late-Life Marriages

prenuptial agreementLate-life marriages are complicated for a variety of reasons. Here’s what planners need to know.

Thanks in part to longer life spans, more elderly Americans are marrying and remarrying today than in the past. Marriages later in life bear unique burdens, and all parties need to understand how to protect themselves, their assets, and their families. To help, CPAs offering personal financial planning services (estate, retirement, investment, risk management/insurance, and tax planning) need to familiarize themselves with the issues involved.

Late-life marriages are complicated for a number of reasons. They can directly impact the inheritance of potential heirs. Remarriages also can affect a spouse’s right to alimony payments from a prior spouse, retirement benefits, Social Security benefits, health insurance, and the obligation to support a spouse’s medical care (even to the point of depleting assets and income).

A personal financial planner must first address whether he or she can provide advice to both spouses—or future spouses—in instances where their interests may conflict. This is especially true when one individual has more assets and/or income than the other. Next, planning questions need to be answered regarding whom the assets are intended to benefit. Is it the new spouse? Children from a prior marriage? Or does the client want them to be devoted to maintaining the couple’s current lifestyle?

More questions to ask
These questions lead to others that the CPA should address with the client. For example:

  • Should the budget be revised to include long-term care insurance? Medical costs? Costs of care at home?
  • Should income be blended or separate? Are assets combined or separate?
  • What about the primary residence? Whose name is it in? How is it to be disposed of at death? What if the couple divorce? What if one of them becomes ill? What if they purchase a new home together? What if one sells a home and moves into the other spouse’s home? If one spouse dies, what rights does the surviving spouse have?

When clients marry at later stages in life, it may be prudent for the client to consider a prenuptial agreement that addresses what will happen should the marriage terminate by death or by divorce. Because of the agreements’ potential impact on planning, CPAs should have at least a basic understanding of how the agreements work in order to help clients work with attorneys to ensure legal documents align with financial goals.

In a traditional prenuptial agreement, the parties should (1) each disclose their assets, liabilities, and income, (2) be represented by separate attorneys who apprise them of their rights, and (3) understand that the agreement should be fair and reasonable when entered into and fair and reasonable when the marriage terminates. However, there may be other special factors when at least one spouse is elderly.

Addressing medical care

For instance, it is extremely important for the prenuptial agreement to address the medical care of the spouse.

The “affirmative statement” clause can be helpful when drafting a prenuptial agreement for a spouse who is getting married later in life. The clause states that the parties agree that the income and assets of the spouse who needs the medical care must be used first before touching the other spouse’s assets and income. This clause in the prenuptial agreement can be helpful down the road when the family asks the healthy spouse why the assets and income are being depleted in that manner.

Clients also should consider the conflicts that could arise between the person who is making the health care decisions (who will very likely be the spouse) and the person or persons making the financial decisions (who could be one or several children). Problems ensue if the goals and objectives of these decision-makers are not aligned. For instance, planners may find themselves in a situation where the person making the health care decisions for the client decides at-home care is best. But the person making the financial decisions may not agree. The best way to avoid this is to think those conflicts through in the planning phase and coordinate the choice of fiduciaries (health care agent and attorney in fact under durable power of attorney) in the documents.

Remember: All estate planning is based on two components—the organizational component (what the documents say) and the operational components (how the plans are implemented). Each of these components is critical and either of them, if not thought through and updated, can thwart the best plans.

Patricia Annino is a sought after speaker and nationally recognized authority on women and estate planning. She educates and empowers women to value themselves and their contributions in order to ACCOMPLISH GREAT THINGS in the world – and in so doing PROTECT THEMSELVES, those they love, and the organizations they care about. Annino recently released her new book, “It’s More Than Money, Protect Your Legacy” available at Amazon.com. To download Annino’s FREE eBook, Estate Planning 101 visit, http://www.patriciaannino.com.

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