Are you in an age-gap relationship? Five percent of first marriages and 20% of second marriages need a special focus on making both of your needs work.

Financial matters for large age-gap retirement planning include retirement funding, Social Security planning, and health care costs.

Retirement Planning

Imagine a scenario in which the older spouse is ready to retire, while the younger spouse is hitting her/his stride and doesn’t want to slow down. How should you coordinate your retirement dates? Don’t even try.

Staggered retirement dates can be an advantage: A younger spouse who continues to work might maintain employer health coverage until both partners are eligible for Medicare.
The younger spouse’s earnings can reduce the need to live off investments, helping ensure that the nest egg lasts longer.
Most couples plan for three decades of retirement at age 65, but if you have a significantly younger spouse, the level of assets rises, and the withdrawal rate declines. The assets needed to fund a $50,000 annual withdrawal for 30 years is about $1.1 million, assuming a 5% rate of return and 3% inflation. For 40 years, the wealth required is $1.34 million.

Social Security Timing

This is more complex in an age-gap relationship. While generally, you’d want to delay taking Social Security benefits as long as possible to lock in higher rates and survivor benefits, there are other considerations.

If one spouse takes benefits early, the survivor will collect the deceased spouse’s benefits at full retirement age or reduced benefits at age 60. The survivor may qualify for benefits on his or her own earnings history — it’s important to take into account each partner’s work situation to see whether either will be dependent on the other’s benefits.
Remarriage after age 60 may impact survivor benefits. A surviving divorced spouse may be eligible for a benefit if he or she had been married for 10 years or more.
Defined benefit pensions, which provide a monthly benefit based on average compensation and length of service, are not as common as they were, but if either partner has one, you’ll have to be especially careful in deciding if and how the other will be covered. Terms also are very specific about when you may draw these benefits. Survivor benefits for spouses are reduced — the survivor may not get the full payout that the employee would be entitled to.

Healthcare

The cost of health care is a real concern for people with long-term serious health issues. If you’re the older retiree close to being eligible for Medicare, but your younger spouse depends on you for health care coverage, you see the problem. You’ll both have to purchase policies privately, and you know that can be quite expensive, if they are even available at all. When one of you retires and the other is still working, that may put a crimp in your overall relationship, but can work for health care benefits. Here, as with other decisions, make sure any plan accommodates the partner with the longest life expectancy.

Age gaps between spouses mean wide variations in retirement dates, life expectancy, health, and other factors. By coordinating with legal and financial professionals, you’ll be able to create an estate plan for your circumstances.

Determining Beneficiaries

Planning for a younger spouse can create an interesting dilemma. Are all assets to be left outright to the surviving spouse? If so, how are children of the older spouse protected? If assets are to be left in trust for the surviving spouse (see our article on QTIP Trusts), will the children of older have to wait until the death of the younger spouse before they receive their inheritance? if not, how are assets divided up between the surviving spouse and the children so as to hopefully provide security for the surviving spouse while maintaining harmony with the children. Who will be charge of these assets while the younger spouse is alive? If the spouse is in charge, she may favor herself over the children. If one or more of the children are in charge, they may not provide for proper care of the spouse in order to enhance the inheritance they will receive.

One client who Dennis represented was the beneficiary of a trust for her. The daughter of her husband was the trustee. The trust was funded with real estate and business assets and the daughter, as trustee, had the power to manipulate how much income was generated by these assets and thereby control how much income Dennis’ client could receive. The were also arguments about provisions in the trust for Dennis’ client’s welfare. After more than a year of litigation and a full day of mediation, Dennis was able to secure his client a lump sum payout and guaranteed annual distribution so his client was no longer subject to the control of her deceased husband’s daughter. The selection of an independent trustee and better planning, while the husband was alive, could have possibly avoided this result.

Southern California’s Premier Estate Planning Law Firm

If you have additional questions or concerns regarding your estate plan, elder or tax law, or probate, contact the experienced and trusted estate planning lawyers at Sandoval Legacy Group, A division of Holstrom Block & Parke, A Professional Law Corporation, by calling (951) 787–7711 to schedule an appointment. No other law firm in Southern California has the knowledge and experience relating to estate planning, special needs planning, probate, conservatorships, business succession planning, tax planning, and trust administration as our lawyers and paralegal staff.

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- You understand that by asking Dennis a question, you are not creating an attorney-client relationship or receiving legal advice. Any question you submit will not be treated as privileged or confidential and may be posted along with its response on www.protect-your-wealth.com so others with similar issues can benefit from the response. However, only your initials and city will be posted along with your question and his response. You understand that Dennis may not be able to respond to your question at all, but if he or one of his associate attorneys responds they will do so in a general manner on which you cannot rely as legal advice. If you want a specific legal response and guidance about estate planning, special needs planning, probate, conservatorships, elder law, taxation, or probate litigation, you should contact Dennis M. Sandoval’s office to schedule an appointment. If your question is outside the areas of the law in which Mr. Sandoval has expertise or if you do not reside in Riverside or San Bernardino Counties or have a legal matter in the Riverside or San Bernardino County Probate Courts, you should seek legal counsel from an attorney practicing in your locality and specializing in the area of the law you have an interest in.