Author Topic: How should an older couple getting married keep their inheritance separate?  (Read 1512 times)

ericrugiero

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My Dad had a wonderful marriage for many years.  About 3 years ago, my Mom died suddenly.  Now, he is 73 and dating a widow who is 68.  He mentioned to me over the weekend that he is thinking about how to preserve the inheritance for my sister and me if he gets married.  He doesn't want any of her money and just wants his money to go to his kids after he dies.  She seems comfortable financially (nice home, nicely furnished and likes to travel) but I have no idea what assets she has.  He (and I) have always believed it's best to combine finances with a spouse.  However, at an older age things seem different.  What would be the best way to accomplish this? 

Should he just keep his accounts separate, split expenses and have a will that specifies his assets go to his children?  What about long term medical costs?  Is there anything that could/should be done to prevent either my dad or his girlfriend from spending the other's assets if one of them ended up with long term medical care or nursing home care that exceeds their own assets? 

This is a new thought process to me.  I've never considered second marriages and how that affects inheritance.  Any wisdom you can share would be appreciated. 

RetiredAt63

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A pre-nup is the basic solution.

My Dad found someone several years after my Mom died.  They didn't get married but instead signed a cohabitation agreement.  Part of that was financial, it laid out spending and inheritance.  Both had children so both wanted to make sure everything was sorted out.  They were together long enough that without the cohabitation agreement they would have been considered common law married. 

One thing for your father to consider is does he really want to get officially married?  Legal cohabitation (i.e. signed documents) is common here for late marriages where one or both have children already and won't be having any together.

ericrugiero

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One thing for your father to consider is does he really want to get officially married?  Legal cohabitation (i.e. signed documents) is common here for late marriages where one or both have children already and won't be having any together.

They wouldn't live together without being married due to their beliefs.  If that wasn't a constraint, it does seem like the simplest solution to the medical/long term care issue. 

Metalcat

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Keeping accounts separate doesn't necessarily protect anything.

He should consult a family lawyer to find out what would be considered communal property and what wouldn't, both in terms of what's brought into the marriage, and in terms of investment gains during the marriage.

So, for example, a jurisdiction may protect whatever personal savings you had before you were married, but all investment gains on that money moving forward are shared.

If he's not comfortable with how the law assigns what is private and what is communal, then he'll need a prenup.

marion10

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This is not an area for do it yourself- see a lawyer and get a pre- nuptial agreement.

Catbert

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Well, one way would be to keep existing accounts (401k, IRA, brokerage) in his sole name and with his children has beneficiary/transfer on death.  Same for her.  Then have a joint checking (and maybe also savings account) that all current income (RMDs, pensions, social security, etc) from both goes into and pays for all joint expenses.  You'd need to figure out houses and how to be fair.  Maybe sell both and buy one jointly with right of survivorship.

I know a couple with pretty substantial assets who did a version of this.  Kept serious assets separate with children as beneficiaries.  Income goes into joint account.  Both had a paid off house of similar value.  Sold one, put the proceeds in a joint account and retitled the other which they now live in as jointly owned with right of survivorship.    Important to note that the survivor will come out "ahead" bc they'll own the primary residence and also have whatever unspent cash is left from selling the one house.  But in their case plenty of money to go around.I know there was a lawyer involved.  Not sure if a pre-nup.

Edited to add:  I agree an attorney should be involved.  I offered this a one way structure the financial set up. 
« Last Edit: May 10, 2021, 04:46:29 PM by Catbert »

Villanelle

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As others have said, this is a time for paying a lawyer and getting a pre-nup as well as advice on how to make sure things don't get mingled. 

Metalcat

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Well, one way would be to keep existing accounts (401k, IRA, brokerage) in his sole name and with his children has beneficiary/transfer on death.  Same for her.  Then have a joint checking (and maybe also savings account) that all current income (RMDs, pensions, social security, etc) from both goes into and pays for all joint expenses.  You'd need to figure out houses and how to be fair.  Maybe sell both and buy one jointly with right of survivorship.

I know a couple with pretty substantial assets who did a version of this.  Kept serious assets separate with children as beneficiaries.  Income goes into joint account.  Both had a paid off house of similar value.  Sold one, put the proceeds in a joint account and retitled the other which they now live in as jointly owned with right of survivorship.    Important to note that the survivor will come out "ahead" bc they'll own the primary residence and also have whatever unspent cash is left from selling the one house.  But in their case plenty of money to go around.I know there was a lawyer involved.  Not sure if a pre-nup.

Edited to add:  I agree an attorney should be involved.  I offered this a one way structure the financial set up.

I think this could very much depend on the jurisdiction.

I've seen couples assume that their affairs are in order and then move to a new jurisdiction where whatever they did doesn't count anymore. Where I live, if DH and I moved just 10 minutes north, any pre-nup we might have would become totally invalid. Jurisdiction matters.

Sandi_k

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Well, one way would be to keep existing accounts (401k, IRA, brokerage) in his sole name and with his children has beneficiary/transfer on death.  Same for her.  Then have a joint checking (and maybe also savings account) that all current income (RMDs, pensions, social security, etc) from both goes into and pays for all joint expenses.  You'd need to figure out houses and how to be fair.  Maybe sell both and buy one jointly with right of survivorship.

I know a couple with pretty substantial assets who did a version of this.  Kept serious assets separate with children as beneficiaries.  Income goes into joint account.  Both had a paid off house of similar value.  Sold one, put the proceeds in a joint account and retitled the other which they now live in as jointly owned with right of survivorship.    Important to note that the survivor will come out "ahead" bc they'll own the primary residence and also have whatever unspent cash is left from selling the one house.  But in their case plenty of money to go around.I know there was a lawyer involved.  Not sure if a pre-nup.

Edited to add:  I agree an attorney should be involved.  I offered this a one way structure the financial set up.

Nope. Trust and pre nup are the only sure ways; some jurisdictions REQUIRE that a portion be inherited by a spouse.

If they have their individual assets held in trust, and a pre-nup in place (using different attorneys to ensure proper counsel to each), intent and legality are much better protected.

secondcor521

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As Malcat points out, jurisdiction matters.

Specifically in estate matters, some states are community property states and others are not.  Even within those two broad categories, there are nuances that might be important to OP's father.  If a state is community property, then how the assets are held may not matter.

I'll suggest two alternatives for OP to consider:

1.  Have them get "church married" but not "government married".  I know a couple who did this because they wanted to live together but their kids objected unless they were married, but the wife had a pension that went away if she remarried.  The compromise satisfied every one, I think.  I guess they should research common law marriage laws in their state if that is of concern to either of them or any of their kids.

2.  Have them live next door to each other (or close by).  They loose efficiencies of scale in housing, but they can keep their finances separate and also have a way to escape each other, which may be important to one or the other or both.  My Dad and his GF do this by living in different apartments in an independent living portion of a CCRC, and I know a forum friend and her BF do this with houses next door to each other.

socaso

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Some great suggestions here. One idea I've seen floating around is that they could each take out life insurance policies with each other as beneficiaries so that there is an inheritance of sorts when one or the other passes the surviving spouse does receive something and the rest of the estate can go to the children as he wants. Other than the estate items, they could combine parts of their finances such as joint accounts for any social security or pensions they receive.

And he needs to have quite a frank conversation with her about money. At their age they cannot afford not to know exactly were the other person stands with their current finances and plans for the future.

MrThatsDifferent

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My Dad had a wonderful marriage for many years.  About 3 years ago, my Mom died suddenly.  Now, he is 73 and dating a widow who is 68.  He mentioned to me over the weekend that he is thinking about how to preserve the inheritance for my sister and me if he gets married.  He doesn't want any of her money and just wants his money to go to his kids after he dies.  She seems comfortable financially (nice home, nicely furnished and likes to travel) but I have no idea what assets she has.  He (and I) have always believed it's best to combine finances with a spouse.  However, at an older age things seem different.  What would be the best way to accomplish this? 

Should he just keep his accounts separate, split expenses and have a will that specifies his assets go to his children?  What about long term medical costs?  Is there anything that could/should be done to prevent either my dad or his girlfriend from spending the other's assets if one of them ended up with long term medical care or nursing home care that exceeds their own assets? 

This is a new thought process to me.  I've never considered second marriages and how that affects inheritance.  Any wisdom you can share would be appreciated.

You take a tiny bit of the money and hire a reputable lawyer who does estate planning, and that expert will do everything you need. Simple.

BlueHouse

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Well, one way would be to keep existing accounts (401k, IRA, brokerage) in his sole name and with his children has beneficiary/transfer on death.   

Nope. If they marry, the 401k goes to the spouse.   Federal law automatically makes the spouse the benficiary of a 401k.  The ONLY way out of this is for the spouse to sign a waiver.  Not a pre-nup, not a beneficiary designation.   This is meant to protect the spouse so the person with the 401k doesn't secretly will-away the money to someone else. 

Hula Hoop

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You should check the trusts and estates law in your dad's state.  My dad is in New York and there spouses automatically get a third of the estate (their "elective share").  So even if he lived in that state and even if his will specified otherwise, his spouse would be able to claim a third.  Not sure how things are in other states.

better late

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similar situation although one of the re-married older spouse has a relatively high net worth compared to his wife (although she would have been fine without this union).
They have been married a long time at this point so this is (roughly) how they decided to balance wanting to leave assets to their grown children and caring for a spouse well into old age when no longer alive.
If the wealthier spouse dies first, about 40%of his estate will pass directly to children while the remainder will go into a trust (with an outside trustee) for the wife. There is enough assets in the remainder  and a paid off home to ensure the spouse is provided for (along with her own assets). When she passes the remainder in the trust is distributed to according to their plan.

There are more details but thatís the gist.