BERLIN – Baby boomers who get married for the first time, or for an additional time, later in life can face numerous financial issues that are different from those of young newlyweds.
To ensure these issues are properly addressed in advance of their marriage, retirees and boomers should have a conversation with a financial advisor, in addition to speaking with their attorney and tax advisor. During the conversation, discuss assets, liabilities, budgets and sources of income.
Deciding the disposition of a family home is important, as it is often a couple’s largest investment. Remarrying boomers and retirees may face some tough decisions about deciding where to live, whether to re-title the house and deciding what happens to the property if either partner dies.
Becoming engaged is a good time to take a fresh look at how your other assets are titled, as well, particularly if you own an asset jointly, or have retirement accounts or insurance and annuity contracts where the beneficiary designation takes precedence over your will. Ensuring that your assets pass to your intended beneficiaries, requires the coordination of how your assets are titled, your beneficiary designations, your will and any trusts that you establish.
A trust that is commonly used to provide income to your spouse but ultimately pass assets to your children is a Qualified Terminal Interest Property Trust (QTIP). It’s a popular option for couples with substantial assets and children from a prior marriage, but it can also make sense to ensure that your intended wishes are carried out should your surviving spouse remarry.
Properly designating beneficiaries is critical for your retirement accounts, annuities and other forms of insurance because the proceeds go to listed beneficiaries outside the dictates of your will. Therefore, the best way to see that your wishes are carried out is to keep your beneficiaries up to date. If you have a 401(k) or other qualified plan and your children are beneficiaries, your new spouse needs to consent to that arrangement.
Although 401(k)s and IRAs are becoming more popular, you may also be eligible for a defined benefit pension plan through an employer. If you begin taking distributions from the plan before marriage, you won’t be able to change the defined benefit payment option you elected. However, if you have not started receiving benefits, you will have the option of choosing a joint and survivor option which will continue payment of all or a portion on your pension to your spouse if still living upon your death. Your financial advisor can help you create a retirement income plan taking into account all of these options.
While most people are aware of federal estate laws, they are often surprised to learn that state laws may also impact their estate. In that regard, it’s important to work with an estate-planning attorney and tax advisor who practice in the state where you reside. The rules of that state may require a different strategy or require the filing of additional documents.
Though these issues may seem to be numerous and complicated, particularly when thinking about all of the other planning which a wedding requires, they can be easily understood and managed with the guidance of a trusted financial advisor. Together you and your partner, along with your advisors, can create the foundation for a new and happy marriage in your retirement.
(The writer is a Merrill Lynch Senior Financial Advisor. She can be reached at 410-213-9084.)