Thinking of marrying? Then avoid these ten financial pitfalls.
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According to the Office for National Statistics, more over-65s are marrying or entering civil partnerships these days than younger people. One in ten love-struck seniors has previously been single, two-thirds divorced and the rest widowed.
The fact they are able to start a new life is excellent news. The Journal of Gerontology recently reported that supportive marriage has been proved to protect against poor health, disability and limitations in later life.
Yet, while love makes the heart beat faster at any age, getting your financial affairs in order in a later-life relationship can present particular difficulties, especially if you have been married before and have children.
So don’t wait for the confetti to blow away before you sort them out.
1. Make a Will
Unless you have made a Will that specifically states that you have a forthcoming marriage in mind, the act of getting married automatically revokes all previous testaments.
This can catch second-timers out, as they may believe they have left property to relatives, such as children, by making an earlier Will. If you die without making a new Will, your estate will be treated as if you died intestate – and your children could run the risk of getting nothing.
Find out about the common mistakes people make in their Wills and how to avoid them.
2. Make sure your Will says what you mean it to say
Typically, later-life partners want to provide for their new spouse but then ultimately leave assets to children of a first marriage.
This may involve using a Trust because, if you leave everything to your spouse on the understanding that they will fulfil your wishes in their own Will, once you are gone your spouse – whatever they have promised during your lifetime – could be tempted to make a Will cutting your children out. Take legal advice.
Guide to the different types of Trust.
3. Provide for your spouse
If you own the marital home outright and simply leave it to your children, give some thought as to where your spouse is going to live after you have gone and where their income is to come from. Once again, you may need to create a Trust to give your spouse a lifetime interest in your home.
If you are the person who moves in with an existing property owner or sole tenant of a rented property, know your rights if your partner should die, particularly if you are not married.
Ensure that you have a right to remain in the house, that both names are on any tenancy agreement or that you can take the tenancy over if you need to.
Tips on managing your finances in a new relationship.
4. Tenants in common
If you buy a home together, particularly if it is mortgaged, the legal ownership will probably be as ‘joint tenants’. This means that the parties own the whole property simultaneously. If one party dies, the other assumes sole ownership, no matter what the deceased’s Will says.
If you want to leave a share of your property to someone else, such as a child, you must sever the joint tenancy and become tenants in common, where you both own separate shares.
Equally, you may need to update your Will to do the reverse if you and an estranged spouse own a home as tenants in common.
Last February saw a legal battle over a deceased dentist’s house, where his share of the property passed via his Will to his estranged wife rather than to his partner of 18 years, because he never married his second partner and didn’t change his Will.
Things you need to know before signing property over to children.
5. Avoiding tax
Some people do indeed marry for money – and avoiding inheritance tax is one reason to do so.
Gifts and transfers between married couples and civil partners are free of inheritance tax, a perk not available to unmarried partners. There are also opportunities for married couples to avoid Capital Gains Tax (CGT).
Anita Montieth, tax manager at the Institute of Chartered Accountants in England and Wales, says: "Marriage or civil partnership creates more of a “fluid” environment for CGT, so the couple can pass ownership of assets between them free of tax.
"If you are selling assets that would otherwise be liable for CGT, you will be taxed on any gains over £11,100 [in 2016-17]. As both spouses have a CGT exemption, assets can be transferred and shared between them so that effectively a couple could realise gains of £22,200 before CGT is due."
Six taxes you can legally avoid.
6. Marriage allowance
Just 8% of people entitled to the new marriage allowance, introduced last year (2015), which can boost your income by £220 a year, have claimed it.
The allowance enables married couples and civil partners who earn less than the current (2016-2017) £11,000 income tax personal allowance to transfer up to £1,100 of this allowance to their partner.
The allowance can be transferred only where neither you nor your spouse or civil partner is liable to income tax above the basic rate for the tax year. Both individuals must be born on or after 6 April, 1935, and couples can receive the full benefit in their first year of marriage, no matter which month of the year they married.
Couples where one was born before April, 1935 may be able to claim the older benefit, the married couple’s allowance, which could reduce their tax bill by between £322 and £835.50 a year.
Read more about the marriage allowance and how to claim it.
7. More than one home
Later-life lovebirds may already each own their own home. If you move in together and sell one, but then decide to buy another property, you may be caught out by the new 3% Stamp Duty Land Tax surcharge on your purchase.
The rules are complicated and are intended to catch out those with holiday homes and buy-to-let properties, rather than those simply changing the residence they live in. But make sure you don’t get trapped by not understanding the rules.
Unmarried couples are unaffected by the new rules and won’t have to pay the extra tax if they continue to own each property in the sole names of each.
Find out more about the changes to stamp duty on additional properties.
8. Pensions and benefits
This is an area fraught with difficulty. If you receive a pension already or any state benefits, you need to check what happens if you remarry, enter a civil partnership or indeed move in with someone as an unmarried partner.
Don’t rely on your financial situation being the same as when you lived apart, particularly if you are a widow.
Many occupational pension schemes offer spouse and partner benefits after the scheme member has died. If you reached state pension age before April 6, 2016, you may be able to inherit a proportion of your spouse’s state earnings related pension (the higher rate top-up), and those with an incomplete NI record may be able to use their spouse’s record to give them a better state pension if they lack enough contributions of their own.
These benefits are being withdrawn, although there is some transitional protection, so you need to check your entitlement.
Read Paul Lewis' guide to the new state pension rules.
9. Joint bank accounts
A joint account with a spouse or other partner may be convenient, and whether you have one is a matter of choice. However, think long and hard about whether you want savings accounts in joint names, particularly if they contain large sums.
Moving money between partners can save tax and, depending on how the account is set up, joint accounts can generally be accessed by either partner, including after the death of one party (useful to ensure that a surviving spouse or partner is not left without funds prior to probate). Do make sure that any joint accounts don’t affect means-tested benefits, particularly care fees.
For more tips and useful information, browse our money articles.
10. Care fees
How the fees for long-term care will be met if care is needed can be worrying for everyone in later life, but perhaps more so when there are children from a first marriage concerned that the wealth garnered during their parents’ marriage could disappear in expenditure on someone they hardly know.
Care fees are payable only by the party needing care. A partner or spouse is never asked to pay them.
When it comes to a local authority assessing how much it might contribute to the cost of a person’s care, only assets belonging to the party needing care are included in a means test.
No couple can lose their home, even if the house belongs solely to the party needing care. The value of the house is always disregarded if someone over the age of 60 is living in it.
The one area that you do need to take care with, however, is joint accounts, as the partner needing care will generally be deemed to own half the money in a joint account, whoever put the money in the account in the first place So, if your partner has little money in their own right and you think they may one day need care, it might be best not to deposit large sums in a joint account.
Read more from Annie Shaw in every issue of Saga Magazine. Subscribe here.