Prenups and Late-in-Life Marriages

Late–in-life marriages are becoming increasingly common as some couples wait longer to get married for the first time and others choose to try marriage again following a divorce or death. But whether it is a first marriage or second — or third — there are unique financial planning issues that come with late-in-life marriages.

Compared to a couple marrying in their twenties, older couples generally have accumulated more financial assets that they wish to protect. And people who marry later may also have children or other dependents, potentially from a previous marriage. For these reasons, older couples will want to be sure to consider entering into a prenuptial agreement to address the following concerns.

Protect retirement accounts and other financial assets. By the time a person has entered middle or retirement age, it is quite likely that they have amassed significant retirement account balances as well as other business and personal assets. While most retirement accounts require the owner to designate a beneficiary, there may be questions about the timing of when those accounts can be accessed in retirement. A prenup can help to determine which spouse’s account is accessed first — if such an arrangement makes sense — and whether or not some of those funds should be earmarked for other heirs, such as children. Assets designated for the surviving spouse can be put into a trust. These trust assets can be used to support the surviving spouse during that spouse’s remaining lifetime, with the remainder going to the children from the prior marriage.

Preserving funds for children from previous relationships. Oftentimes, older couples have children or other beneficiaries from previous relationships that they wish to provide for after their death. Designating how assets will be shared with the new spouse and any children is something that should be clarified in a prenuptial agreement to avoid confusion and tough conversations down the line. Also, there may be assets with sentimental value, such as real estate and art, for instance, that a spouse may prefer to leave to their children. More liquid financial assets, which may be used to fund a retirement lifestyle, may be designated for the new spouse or a trust for the new spouse.

Use the prenup to discuss other financial issues. There may be some issues that a prenuptial agreement cannot cover but nevertheless should be discussed when drafting the agreement. For example, financing late-in-life care is one concern that may come up. Also, it is possible that a spouse may choose to live closer to their kids later in life if their health needs necessitate it. While plans may change, setting expectations early can help to avoid conflict down the line.

Consider setting up a revocable trust to keep separate property separate. As a separate legal entity, this structure would add another layer of protection. Keeping your separate funds in a separate entity may help reduce the administrative tasks of tracing acquisitions and provide another hurdle to comingling assets.

Keep in mind that post-marital appreciation of pre-marital separate property can be considered marital property. The deciding factor will be whether the asset appreciates actively or passively. For example, appreciation on rental real estate actively managed by you, even if owned in your individual name only, may be subject to a claim by your spouse due to your efforts on this property during your marriage. You may want to consider hiring a property manager as a way of addressing this issue.

The nursing home cost risk. A noteworthy consequence of legal marriage has to do with payment of skilled nursing facility bills. Couples marrying later in life might consider purchasing long-term care insurance to mitigate the financial damage that would result if one of them ends up in a nursing home for a long stay or requires long term care.

Nowadays more couples have prenups to protect their assets than a decade ago. As people marry later in life, it is a prudent step to consider.

For more information or to discuss planning around late-in-life marriages, contact your Anchin Relationship Partner or Susan Fludgate, a Senior Manager in Anchin Private Client and the firm’s Matrimonial Advisory Group, at 212.840.3456 or [email protected].