There are many reasons why people remain unmarried today, whether because of children from a prior marriages, high income taxes, or outstanding debt. Regardless of the reason, it is important that unmarried couples plan ahead.
Many seniors, whether widowed or divorced, are unsure about marrying again. Our clients often have concerns about protecting their children from a previous marriage. With a premarital, or prenuptial, agreement, a couple can accomplish this goal by giving up all rights to inherit from each other. In North Carolina, without a valid pre-nuptial in place, your spouse has the right to inherit before your children do. How much your spouse can inherit will vary from one state to the next. If you do not have a prenuptial agreement, North Carolina uses factors such as how long you have been married and how many children you have to determine each person’s share.
Seniors also have concerns about whether marriage will obligate them to pay for their spouse’s debts (such as outstanding medical bills). In North Carolina, you are generally not liable for your spouse’s debts unless you have guaranteed that responsibility (by signing an agreement).
Other couples may have concerns about increased tax liability that can come with marriage. The income tax code benefits traditional marriages (where one spouse is the breadwinner and the other is the homemaker). But, if both spouses have very good income, the tax code actually hurts them. Adding both incomes together may place the couple in a higher tax bracket, which can be negative for after-tax net income. Unfortunately, the tax code has a penalty for any married person who files separately.
In addition to negative tax implications, there are several other financial reasons why people may not want to get married, such as the loss of important benefits. You may lose alimony if you remarry depending on your circumstances. Likewise, if you’re receiving a pension from your spouse, then you may lose that pension depending on the contract. Finally, you may lose benefits from Social Security if you are a widow or widower or have been divorced. If you’re divorced and you don’t remarry, then you can take half of your ex-spouse’s Social Security benefit when you reach retirement age. If you survive your ex-spouse, then you can claim all of his or her Social Security if it’s higher than your own. If you reach sixty and then later remarry, you can still take your ex-spouse’s Social Security. For example, if you remarry at sixty-two, then you can take your own Social Security, your new spouse’s Social Security, or your ex spouse’s Social Security at the appropriate time. But, if you remarry at fifty-nine, you lose the potential of claiming your ex-spouse’s benefit.
Some do not know that a spouse can elect to take half of their spouse’s Social Security in lieu of their own during their spouse’s lifetime. This is important, particularly if one person’s benefit is much higher than the other’s. The Social Security benefit attaches when you get married, but if someone dies before the contemplated marriage, then it is too late. The earliest that you can draw your Social Security is at age 62, or you can defer until age 70. If you expect a long life, or you are still working, then generally waiting until you’re age 66-70 is better instead of withdrawing your benefit early. A little-known tip is that if you wait to withdraw until age 66 and eight months, you will receive a nice bump in your benefit.
Finally, young people are waiting longer to get married today, often because they are not financially ready due to outstanding debt. Young people today may have struggled to get a first job, save their money, or have been living with their parents to reduce expenses. For this reason, they are staying unmarried for much longer.
If you’ve decided to remain an unmarried couple, be sure to put a plan in place and communicate well with each other about who will be responsible for contributions and expenses. Finally, make sure all assets are properly titled so that your plan will work the way that you want. Obviously, unmarried couples must know that they cannot claim one another’s Social Security benefits.
If you or your loved one needs help planning as an unmarried couple, or if you have questions about government assistance programs such as Medicaid, Veteran’s Benefits, or other Special Needs programs, consider W.G. Alexander & Associates – we offer a unique blend of asset protection, Elder Law and estate planning. You can also attend our free seminars, learn more through our website at www.wgalaw.com, or call us at (919) 256-7000. Also, every Tuesday morning at 9 am, you can listen to our radio show, “Asset Protection Today,” on Talk Radio 850 WPTK (AM) with Attorney Bill Alexander.