Marital Debt and Estate Planning for Older Adults

There are many issues that older adults face when it comes to marriage later in life and estate planning. Given that the rate of “gray divorce,” or divorce among seniors, continues to rise, this also means that there are more single people aged 65 and older who are getting remarried. For many seniors, the prospect of living alone after a divorce (and after being married for many years, and often decades) can feel daunting both emotionally and financially. Indeed, according to an article in the Washington Post, gray divorce “can devastate your retirement plans.” And, as that article underscores, the rate of gray divorce has tripled in the last three decades.

In other words, there are many single, older divorcees who are dealing with financial stress that they did not anticipate during retirement. Many seniors are also struggling financially and considering bankruptcy as an option, as a recent article in The New York Times points out. What all of this means is that many seniors are getting remarried in part to share finances. At the same time, this can also mean that one of the parties is getting married to someone with a significant amount of debt. How should this affect marriage plans and estate planning?

Debt from Before the Marriage Should Be Classified As Separate Property

 A recent article in the Orlando Sentinel poses a question from an older Floridian that addresses an issue like the one we mentioned above: Am I responsible for my partner’s debt if we get married? Even for seniors, any debt that was acquired before the marriage typically is classified as separate property. As such, if Spouse A comes to the marriage with $100,000 in debt and Spouse B comes to the marriage with no debt, Spouse A’s debt would be considered “separate property,” and thus not divisible in the event of a divorce.

However, the calculation can change when we start talking about estate planning and the death of Spouse A.

Administering the Estate of a Spouse with Separate Debt

Imagine that Spouse A and Spouse B get married, and Spouse B is named as the executor or administrator of Spouse A’s estate in the event of death. Spouse A passes away several years into the marriage, and Spouse B becomes the executor or administrator of Spouse A’s estate. As the executor, Spouse B is responsible for paying Spouse A’s debts out of the estate. Since the couple has now been married for several years, part of Spouse A’s estate may include marital property (or property that you own together), such as bank accounts, retirement accounts, or other assets.

What can Spouse B do to avoid becoming personally responsible for Spouse A’s debts? First, the couple can consider a premarital agreement prior to the marriage. Through a premarital agreement, both parties can clarify how property should be classified, and how estate planning issues should play out in the event of one of their deaths.

If the parties are already married and cannot enter into a premarital agreement, they can consider a postnuptial agreement, which is also a contract through which they can provide for the distribution of assets in the event of death. In addition, the parties can take steps during the marriage to keep their property separate, avoiding the creation of assets that are clearly joint assets.

Consult an Experienced Tampa Family Law and Estate Planning Attorney

 If you have questions about debt, estate planning, and marriage in older age, a Tampa family lawyer with experience in estate planning issues can help. Contact Bubley & Bubley, P.A. for more information.

Resources:

nytimes.com/2018/08/05/business/bankruptcy-older-americans.html

orlandosentinel.com/business/consumer/os-cfb-ask-expert-estate-planning-spouse-previous-debt-20181011-story.html

washingtonpost.com/news/get-there/wp/2018/03/26/a-gray-divorce-can-devastate-your-retirement-plans-heres-how/?utm_term=.7962bf3347ec