Relationships And Retirement Planning

It's no big secret that financial problems can be one of the top reasons for divorce in today's society. So, it's very important that couples are open to discussing their debts, credit history, income and budgets with each other when considering undertaking a long-term relationship that requires living together and sharing expenses.

It's no longer uncommon for unmarried couples over the age of 60 to seek financial, legal or tax advice before or while they're living together. There are so many different considerations and mistakes that can be made if proper planning and an overall evaluation are overlooked. This is especially true if ex-spouses, children and grandchildren are in the picture and if it's important to you that specific portions of your estate pass to your heirs.

Living Arrangements
In the case of unmarried couples moving in together, it's typical that one of the individuals ends up selling or renting his or her residence and moving into his or her partner's home. They may decide to split the living and housing expenses in this case depending on who qualifies for the tax deductions, if available.

Should they purchase a residence together, it might be wise for them to purchase life insurance policies on each other to help pay off the mortgage in the event of the untimely death of one of the partners. They will also need to consider whose name will be on the various bills and how those expenses will be shared. In the event of death, estate documents could include language that allows the surviving partner to live in the home until his or her death, thus avoiding interference of the deceased's family members.

Joint or Individual Accounts?
How bank accounts, credit cards and other debts are titled can depend on how the funds were accumulated or how the debts were or may be incurred. Many unmarried couples like the idea of keeping separate all the assets and debts they had before the relationship.

In addition, they might open up a joint account funded by both monthly social security benefits to pay for joint expenses such as nights out at the theater, restaurant dinners, housing expenses, vacations and other adventures that they undertake together.

IRA, Pension and Retirement Assets
When considering retirement accounts and benefits, it is important to remember that certain spousal advantages can be lost between unmarried couples. These factors include the spousal rollover IRA option, spousal pension continuation benefit election and the higher social security benefit of a deceased spouse if the survivor remarries before the age of 60.

Beneficiary designations should be carefully selected and reviewed at least annually so they reflect your exact wishes. Beneficiary designations, such as IRAs, annuities and life insurance, are contractual. Therefore, they will always supersede heirs that you name in other estate documents should there be a discrepancy.

Separate Tax Returns
When unmarried couples live together, one of the trickiest areas that arises when filing separate tax returns is determining who gets to deduct which expenses. Take the example of an unmarried couple purchasing into a Continuing Care Retirement Community (CCRC) in which the couple was entitled to a first-year medical/long-term care deduction of over $150,000. While the tax law is pretty thin on this type of arrangement, the couple's accountant computed the dollar percentage of each person's contribution toward the down payment into the CCRC and used that percentage of the deduction to distribute and utilize it on each separate tax return. Different accountants may take different stances on certain deductions and expenses, thus causing them to be lost.

Estate Planning
No one likes to think about long-term healthcare, loved ones getting sick, death or even "pulling the plug," but they're all a fact of life that each and every one of us will someday face. It's important that you have a will, power of attorney, living will and healthcare directive in place well before you enter retirement. Loss of the unlimited marital deduction is another pitfall for wealthy unmarried couples that should be considered.

Unmarried retired couples will need to make tough decisions that may require many revisions and updating over time concerning beneficiary choices and medical decisions. When retirees' children (maybe from a prior marriage) live in a state different from them, they may rely more on their partners for medical decisions and help in these areas.

There are also many cases where one half of an unmarried couple would like to keep his or her individual estate separate from that of his or her retired partner. In these cases, the couple may want to set up trust agreements, wills and other estate documents to segregate specific assets.

The Bottom Line
Most people don't plan to fail … they just simply fail to plan by procrastinating, avoidance or not wanting to spend the money for professional help. These failures can cost them much more down the road.



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