Estate planning for couples with significant age differences

From Next Avenue — By Rachel Leland — 

Relationships with significant age gaps come with unique rewards and challenges, especially for these “May-December” couples discussing how to manage their estate later in life.

When a married couple has a significant age gap, assets must last longer to ensure the younger spouse has adequate resources after the older one dies. Failing to provide for important considerations, like finances, wills and health care during estate planning can lead to unforeseen negative consequences in the future.

While the average age gap in heterosexual marriages in the United States is 3.69 years, according to 2023 U.S. Census Bureau data, some research shows that in Western countries, about 8% of heterosexual couples have an age gap of 10 years or more.

For couples with a significant age difference, it is critical to have a financial plan if one spouse will likely reach significant life events, such as retirement or needing long-term care, well before the other spouse.

“If [a couple] is 65 [and] 63, they’re probably crossing the finishing line at the same time,” says Nilay Gandhi, a senior wealth advisor at Vanguard in West Chester, Pennsylvania. “For those who are significantly older or younger, the future can look different, meaning that each person will view things a little bit differently crossing that finish line of their retirement.”

A couple with a nearly 20-year age difference approached Ryan Fitzgerald, a real estate broker, for help in planning their estate. The husband had three grown children from a previous marriage and didn’t want them to contest his wife’s future security, Fitzgerald said.

“We worked to draft provisions giving [her] their home outright while also providing [his] children an equal share of remaining assets after a certain period,” Fitzgerald said. “This balance ensured her comfort with [her husband] still leaving a legacy [for] his first family.”

Because families often have complicated feelings about inheritances, Fitzgerald suggests choosing a disinterested party to serve as executor of your estate. Someone who will not benefit personally is more likely to be considered objective by your heirs.

A financial planner and an estate attorney can help you navigate the financial and legal complexities of estate planning and create a document that meets the needs of your and your spouse instead of settling matters in probate, which can be both expensive and stressful.

“Review and update beneficiary designations on retirement accounts, life insurance policies and other financial instruments,” says Mike Chappell, co-founder of Forms Pal, a Miami Beach-based platform offering downloadable legal forms. “This ensures that these assets pass directly to the intended beneficiary without going through probate.”

Often, couples with a significant age gap have children from previous marriages. In conversations about bequeathing assets, clearly state which assets you want each of your loved ones to receive.

Whether children from different relationships receive an equal sum is a sensitive matter; you should be transparent about it with your financial planner and spouse to ensure the estate plan fits your values and intentions.

“There can be a lot of finger-pointing and turmoil after someone passes, which can be really detrimental to the surviving spouse because now they are mourning the loss of their loved one and trying to deal with . . . a financial mess,” says Melissa Murphy, founder and CEO of Aging Advocates CNY in Jamesville, New York. “Unfortunately, when we have money and power, it can bring out the worst in people.”

When there is a significant age gap in a marriage and the older spouse dies, the younger, surviving spouse may remarry. If estate planning is not done correctly, the new spouse could inherit the assets.

In such cases, the older spouse might want to consider leaving assets in a marital trust for the surviving spouse’s benefit. This provides the surviving spouse with access to funds as needed, but upon the survivor’s death, those assets go to the older spouse’s other beneficiaries.

“This is particularly important if there are children from separate relationships because if the surviving spouse gets the assets outright, that spouse has all control to give those assets to whomever he or she chooses, which might not be the older spouse’s children,” says Kate Maier, a vice president at Wealth Enhancement Group in Plymouth, Minnesota.

Remember that if the surviving spouse is closer in age to the older spouse’s children, a marital trust might not be the best option because the children won’t receive any of the assets until the surviving spouse dies.

With age, the older partner may face significant health issues well before their younger spouse does, necessitating long-term care.

Given that the average monthly Social Security benefit is $1,907, many people turn to Medicaid to cover long-term care costs. However, to qualify, one must often exhaust one’s assets, which can challenge an older spouse who wants to bequeath assets to their younger spouse.

In some states, an applicant or their spouse must live in their primary residence to qualify for Medicaid based on home ownership. For example, if the older person had dementia and required care in an assisted living facility, the younger spouse would need to remain in the home in order for them to receive coverage through Medicaid, Murphy said.

Couples in this situation might consider pursuing an irrevocable trust, such as a Medicaid Asset Protection Trust, which protects the applicant’s assets from being evaluated for eligibility purposes, Murphy said.

Finally, couples should name a health care power of attorney and pursue a living will. These documents are often confused with one another, so it’s important to know the difference.

A medical power of attorney designates someone to make medical decisions for someone if that person cannot make them on their own, while a living will outlines specific medical procedures you do or do not want to be performed.

Don’t overlook retirement benefits when evaluating the assets you can leave to your loved ones.

If the older spouse has a higher Social Security benefit than their younger spouse, consider waiting until age 70 to begin collecting Social Security to maximize the younger spouse’s lifetime survivor benefit. Withdrawing early locks in a lower survivor benefit and permanently reduces what the surviving spouse will receive.

“By maximizing the survivor benefit and therefore maximizing a fixed-income source for the survivor, you may free up some funds elsewhere to cover other estate-planning goals or simply ensure that the survivor will have enough income and assets to cover living expenses,” says Maier.

Conversations about estate planning often center on finances and assets, overlooking the process’ emotional aspects. Some experts say that’s a mistake.

“One of the most important things for any couple to keep in mind is that proper estate planning is about far more than just finances,” says Crystal Olenbush, a Realtor in Austin, Texas. “It’s about ensuring both partners feel secure and cared for no matter what challenges may come.”

If you are the primary manager of your family’s finances, have an open discussion with your spouse to determine if they are able and willing to carry out your wishes. If they are unable or unwilling to do so, you may decide to hand over this responsibility to a financial professional.

Having an open dialogue helps empower the people who are important to you, allowing them to collectively take control rather than leaving things to chance.

“Discussing finances openly and honestly, especially end-of-life decisions, is difficult but necessary,” says Ben Klesinger, a financial advisor in Greenwood Village, Colorado. “. . . While there may be complex family dynamics, the most successful couples I’ve seen are transparent and come to mutual agreement on both short-term and long-term financial decisions.”