To Tie the Knot or Not

Personal Money Planning |

By Michelle Kuehner

"It's complicated." Asking older folks why they do not remarry often yields this response. They make the decision for several reasons. They wish to remain self-sufficient and financially stable—not to be alone.

This was the justification my friend's mother gave years ago. Despite being married for more than two decades, she opted to remain in the "single" tax filing category after her husband passed.

She and her late husband had fallen into a minimal monthly payment cycle. Even though she received her husband's military pension, it was insufficient to cover the debt they had accumulated over time. Overextended and unable to make payments, she was forced to file for bankruptcy and move into an apartment. That is where she met Bob.

For people in their golden years, this is not an uncommon situation. Those over 50 who choose to cohabitate increased by 75% between 2007 and 2016, according to data from the US Census Bureau. Many who are unmarried still long for a committed relationship. That said, they still refuse to get married, like Karen and Bob.

Many couples instead choose to cohabitate to keep certain benefits offered by social security, the military, or disability programs. When it comes to inherited finances, there is frequently a sense of cautiousness in protecting family money, and rightfully so.

A cohabitation agreement may be the solution to protect one from potential financial problems. It is a legally binding contract that outlines the parties' financial rights and responsibilities to one another, both during and after the partnership dissolves, or in the event of one’s death. Having something in writing is immensely beneficial when handling money, since you cannot assume that others will handle things correctly.

The agreement should clearly state who will be responsible for certain expenses. If a couple is living together and one person owns the home, who is responsible for the expenses of maintaining it? Is there an equally shared responsibility, or is the split proportionate to each person's income? Additionally, establishing a joint “household” checking account is recommended. Each person contributes their monthly portion to pay bills. The rest of their money remains in a separate account in their name. It enables bills to be paid while maintaining separate finances.

When deciding to get married, legal considerations come a close second. Some people choose not to remarry due to concerns over how their children or grandkids might react. The worries often center around potential effects on inheritance and family assets.

Since marriage offers a protective layer for accounts that fall under ERISA guidelines, a spouse may have survivorship rights unless waived. However, if some of the assets were inherited from a prior spouse, and those end up going to the new spouse, conflict may arise. In situations like these, if a marriage is going to happen, a prenuptial agreement is something to consider.

Estate laws can be quite puzzling, with each state having its own set of rules. To avoid any surprises, it's always a good idea to seek the guidance of a professional who can help ensure that your assets end up in the right hands.