When love blossoms later in life…

Falling in love is a magical and wondrous experience, but once the heart flutters have settled a little and two people move towards a more serious relationship, various challenges may need to be addressed. Many of these challenges can be easily resolved when we’re young and carefree, but what happens when Cupid appears – or reappears - later in life?

Unlike earlier relationships, when love blossoms late in life careers have slowed down or ceased, the children have left home, and health and fitness may not be what it had been, meaning that a ‘lifetime’ of togetherness may not be as long as first anticipated.

From a less romantic perspective, the financial implications of beginning a relationship at this time of life are serious and need to be considered carefully. In many circumstances, the couple’s children are adults whose voices want to be heard, particularly in relation to matters of the will. Parents who re-partner without considering the broader families and important people who took part in their life journey are at risk of unknowingly creating negative repercussions. For example, ‘new’ partners who pass on their estates only to each other, leaving at least one of the couples’ children with nothing while the other partner’s children inherit all, can cause long-term hurt and pain. In many cases, this act may not be intentional.

Another financial aspect unique to this stage of life emerges when there is a high level of financial disparity between the two partners. While one partner has accumulated a lot of wealth, the other may have not. Questions are then raised in regard to how finances are distributed between the couple while they are alive and after one or both die. 

Other implications can relate to health issues. They include questions such as who would be the primary carer for a sick partner? The sick partner’s children, or the new spouse? What are the role divisions between the children, other family members and the spouse?

Take advice and make a plan

Whilst every situation will be different, here are some guidelines for addressing the unique features of financial planning in later life. In particular, emphasis is given to the inter-generational and multi-stakeholder aspects of this relationship.

1: Involve everyone long before the will is read

For many years it was customary to not involve children and other relevant stakeholders in formulating a Will. History books are filled with disputes and hurt feelings over Wills that were read leaving the beneficiaries astonished and devastated over the deceased’s final decisions. Don’t wait until it is too late. Financial matters that can have serious impacts on the future lives of your loved ones need to be discussed well in advance with all relevant stakeholders. Preferably before your Will is signed and sealed.

2: Plan for the present with a view to the future

New relationships require new financial arrangements. For example, if buying a property together, what are the consequences of sharing a dwelling?

Below are some examples:

a)     When purchasing property consider the estate planning implications

When couples decide to purchase a property jointly it has immediate consequences for the beneficiaries of the couple following the death of a partner. This issue can be addressed by registering the property owners as “tenants-in-common”, ensuring that the deceased’s beneficiaries will inherit their appropriate share of the property. Couples may give themselves a “life interest” in the property to allow each to remain living there after their partner’s death. The implication of this for the beneficiaries is that they will only be allowed to receive their inheritance after both partners have died.

b)     Potential age pension changes

An age pension payment will change as a consequence of living together. This can occur when one partner is still working and the other is retired and receiving the pension; or both partners have previously been eligible for a single pension. The difference between the age pensions for a single person is $952.70 per fortnight compared to $1,436.20 as a combined couple – $483.50 less per fortnight.

Case study: Moving In Together

Brian and Elizabeth recently moved in together. Brian is semi-retired and received a part-age pension from Centrelink. Elizabeth is still working full-time and earning a salary. When Brian informed Centrelink of his new living arrangement he had to provide detailed information about Elizabeth’s financial circumstances. Based on their combined assets and income, Centrelink assessed that Brian was no longer eligible for any pension, and his payments stopped. As the Centrelink assessment was completed weeks after he had moved in with Elizabeth, Brian had to repay Centrelink the overpaid pension amount.

c)     Superannuation beneficiaries need to be reviewed

If new partners are members of a superannuation fund they need to review their instructions regarding which beneficiaries receive a death benefit. For example, if a couple has specified a “non-binding” nomination for their beneficiaries, this will be invalid now that they have partnered. This is a complex area of estate planning that requires personalised advice.

3: Design financial agreements suited to the partners’ financial circumstances

A happy relationship is a transparent one, particularly when it comes to money. A good start is to draw up a personal “balance sheet” listing the values of all assets each person owns (eg. property, superannuation, car, bank accounts, etc). All debts and liabilities, such as an outstanding mortgage, personal loans and credit card balances, should also be included.

After both partners are aware of the other’s current financial situation, and if appropriate, a “Binding Financial Agreement” could be considered. This is a legal document that sets out how their property and assets would be divided were they to separate. This is particularly appropriate when there is a high level of financial disparity between partners.

4: Plan health care prudently

Growing old together involves increasing health costs and risks of illness. It is recommended that the partners review their health insurances and redesign them to fit the new life arrangements. Redesigning may also reduce premium costs.

Health care plans need to involve relevant family members who may wish to take part in managing care at times of need. Planning in advance could reduce future friction between the cared one’s family and the new spouse regarding treatment strategies and expenses.

Planning and preparing financially should by no means lessen the excitement of a new love experience, but when addressed properly will allow the newly formed relationship to be a source of growth for the couple and their loved ones, in the present, and into the future.

It is recommended to discuss these matters with an estate planning lawyer and your financial planner sooner rather than later.