What advice would you give to a widow and widower considering marriage on how to manage finances — and deal with adult children?
We are both 60 years old and plan to work a few more years, mostly for health insurance. We both have about $1.5 million in retirement savings accounts. Our spouses’ 401(k)s and IRAs rolled into our accounts.
I have another $500,000 in a brokerage and he has almost another $1 million. We both own homes with $300,000 mortgages. Mine is worth $500,000, Paul’s (not his real name) home is worth $1 million. We have no other debt.
We both have one married, and one unmarried child that we help. We both have two grandchildren.
We should be set up very well. Here’s the concern: His married, well-off daughter is very aggressive about inheritance. She wants the family home retitled in a trust. She wants all life insurance and brokerage beneficiaries in her name. Her brother has had drug-addiction problems, so she’s cutting him out even though it seems he’s the one who will need help.
“‘She wants the family home retitled in a trust. She wants all life insurance and brokerage beneficiaries in her name.’”
The daughter isn’t thrilled about our relationship and suggests we just live together. For religious reasons, I would never do this. Grandma shacking up? What example would I set for my grandchildren?
As a widowed couple, we are realistic enough to plan for the time one of us is left alone. Paul has diabetes, high blood pressure and already sees a cardiologist. What if he has a heart attack? Stroke? Or if he dies?
What’s a fair way to mingle finances and allow security for me should he predecease me while allowing Paul’s daughter to ultimately inherit?
By the way, my children have never raised money as an issue. After we both cared for spouses through cancer, they know life is short and just want us to be happy.
Happy to Have Found Love Again
Dear Happy,
She is overstepping the line, and overplaying her hand.
The first rule of inheritance is that it’s not yours until the decedent’s money is sitting in your bank account. Your fiancé’s daughter can make all the demands she likes, but the only thing your fiancé has to do is say, “You don’t need to be concerned. My affairs are all in order. I’ve always taken care of my own affairs, and I am not changing now.”
How your fiancé decides to split his estate is entirely up to him, and can be done in consultation with a financial adviser and attorney, taking into account each of his children’s individual needs. For instance, if you move in together, he could give you a life estate, allowing you to live in the home for the rest of your life, and dividing the property between his two children thereafter.
Given that you have your own home, however, you may decide to rent it out, and move back there in the event that he predeceases you. There are so many ways to split an inheritance. You could look at the intestate laws of your state, and follow them. In New York, the spouse inherits the first $50,000 of intestate property, plus half of the balance, and the kids inherit the rest.
“Paul” may decide to set up a trust for his son, so he can provide an income for him over the course of his life. If he has or had issues with addiction, this will help him while not putting temptation in his way with a lump sum of money. The best kind of trust is the one that deals with any recurring issues directly, and takes into account the person’s circumstances.
Martin Hagan, a Pennsylvania-based estate-planning attorney who has practiced for four decades, writes: “First, it would authorize distributions only if the beneficiary is actively pursuing treatment and recovery. Second, it would limit distributions to paying only for the expenses incurred in carrying out the treatment plan that will have been developed for the beneficiary.”
You have $2 million collectively in a retirement and brokerage account and $200,000 equity in his home, and you can use these next seven years or so to pay off your mortgage, while your fiancé has $2.5 million and $700,000 in equity on his home. You are both well set up for retirement, and let’s hope you have many years to spend together.
The financial services industry has many opinions. You should, advisers say, have 10 times your salary saved by the time you’re 65 years old. You don’t mention your salary, but I would be surprised if many people in America had that much money saved, especially given all of the unexpected events — divorce, illness, job loss — that can occur in the intervening years.
You also have other priorities than dealing with an aggressive daughter/daughter-in-law. AARP suggests that most people should look into long-term care insurance between the ages of 60 and 65, around the time most people are eligible to qualify for Medicare. If you do it earlier, it can serve as a savings account in the event that you never need long-term care, AARP says.
As retirement columnist Richard Quinn recently wrote on MarketWatch, everybody’s circumstances are different. “Living in retirement isn’t about averages. It isn’t about what other people do or the opinions of experts, especially online instant experts who don’t know anything about you and have yet to experience many years of retirement themselves.”
Don’t give too much oxygen or power to your future daughter-in-law. Her father should give her a stock answer, and be firm. If she persists, he can say, “The subject is closed. I need you to respect the decisions I make about my own life, respect my privacy on these matters, and it would be nice if you would be happy for us, and support us in our marriage together.”
You can’t change people. But you can change wills.
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