Surge in Seniors Shacking up

“Shacking up” used to be controversial. Leave it to the Baby Boomers to make it socially acceptable. More seniors are cohabitating despite their children’s disapproval and their religious faith. Between 2000 and 2010, the number of cohabitating adults aged 50 and older more than doubled to nearly three million. Older people are living together for an average of nine years. Financial reasons top the list of incentives to live together without marrying.

Loss of Income

Alimony usually ceases when the recipient remarries. If you have survivor’s pension benefits, you might lose those if you remarry. If you are receiving a share of your late spouse’s Social Security benefits, you could lose those benefits if you remarry before your 60^th birthday. If you remarry after age 60 (age 50 if you are disabled), you can collect benefits on your former spouse’s record.

Potential Financial Burdens

In Texas, both spouses are on the hook for most debts incurred during the marriage, regardless of who incurred the debt. The average nursing home cost in our area is about $5,000 per month. If you think Medicare will cover nursing home costs, think again. Medicaid will cover the expenses only after you and your spouse have exhausted most of your assets, leaving the healthy spouse broke. You may not want to accept the burden of your partner’s family commitment — pay off adult children’s college loans, cosign on a mortgage or lend money to consolidate credit card debt.

Tax Disincentives

Depending upon your income level and tax situation, marriage could throw you both into the highest tax bracket. If you marry, you could move from both partners using $3,000 of capital losses to offset ordinary income to being a couple who can only offset a total of $3,000. There are many other tax considerations. Consult with a tax CPA for more information.

Estate Planning Risks

Protecting their children’s inheritance is another big reason seniors opt to cohabitate. It is always a good idea to review your estate planning documents and protect your children’s and grandchildren’s interests, but cohabitation makes that essential. Assure yourself and your heirs that their inheritance will remain intact. 

Mingle Assets and Debt? No

When cohabitating, keep separate banking and credit card accounts. Either have two separate accounts or a joint account plus two separate accounts. Do not apply for a joint credit card. Do not comingle debt.

To avoid disputes later, keep your assets separate. Do not contribute toward the purchase of a major asset that is titled to your partner. Think houses, vehicles, boats, airplanes and investment accounts. If you must contribute to assets that are titled, put both your names on the title. (This also applies if you lease your home or apartment. You should both sign the lease.) Consult an estate planning attorney on how to title each asset. Keep track of what you spend on major assets. Better yet, agree to each buy a whole item and have no jointly owned assets. You buy the television and your partner buys the washer and dryer.

Share Household Expenses? Yes

Some couples share equally in the household expenses. Some share proportionately based on each person’s respective income. Here’s where the joint checking account is useful. Every month each of you deposit the agreed upon amount into the joint account. Be sure both of you have access to the account. Many divorces are sparked by (or are all about) the inability to talk about money or agree on spending styles. Don’t ruin your relationship with this mistake. Every month review your expenses and talk openly about your finances.

This agreement to share expenses should not apply to improvements to the house. You need to look at those differently. If you own the house and your partner is helping pay for the kitchen remodel, your partner may feel he has a stake in the value of your house. This gets complicated, especially if you pass away first without clearly covering this situation in your estate planning documents. Instead, keep things simple; agree that the homeowner will fund all major home improvements.

Get a No-Nup? Yep

Although it may not be romantic, get a no-nup. This is a legal document that addresses property division, financial support and debt planning for the possibility that your relationship ends prior to either of you passing on. It is not a DIY project. A family law attorney should draft the document. You want to be clear what will happen to your assets if and when the relationship ends.

All this advice may not be romantic, but it is practical. Contact me if you need recommendations for excellent family law and estate planning attorneys. Plan for the worst and hope for the best.