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From the Editor

The Financial Challenges of New Relationships Later in Life

Despite legal and financial drawbacks, lots of older couples forgo marriage.

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Many of the stories you read in Kiplinger’s are inspired by the personal experiences of our staff members and our impromptu discussions. We figure that if we’re wrestling with certain financial decisions, many of you are, too. So when one of our colleagues announced that he and his significant other had decided to buy an apartment and move in together, it touched off a lively discussion that resulted in a story about merging lives (and finances) later in life. Our Kip couple had been together for eight years; both of them had been married before and had accumulated savings and other assets. “Given our ages and the fact that we both had grown children, we just didn’t see much point in getting married,” says my colleague.

See Also: Overlooked Tax Breaks for the Newly Divorced

Of course, marriage also involves issues of philosophy and religion, and the decision to wed (or not) is a personal one. But when it comes to finances, we can weigh in with certainty: It’s complicated. As senior associate editor Sandra Block points out in her story, getting married conveys a host of benefits. For example, inheritance and gift-tax thresholds are more generous, treatment of inherited IRAs is more favorable, and you’re eligible for family medical leave if health becomes an issue.

What’s more, choosing to live together can mean that you’ll sacrifice tax and other benefits. The lack of a marriage license can squeeze how much tax-free profit you can claim when you sell your home. You won’t have a claim on your partner’s Social Security benefits. In the eyes of the law, you’ll be “legal strangers” and not automatically entitled to things such as visitation rights that you get by default if you’re married.

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Plus, "if you split up, the state won’t protect you," says Sandy, so you need to create a legal framework that includes a cohabitation agreement. My colleague did just that. "We have a document that details what happens to the property should one person die before the other or should we dissolve the relationship," he says. "One lawyer wrote a draft, and then we each had our own lawyer review it."

Despite the legal and financial drawbacks, lots of older couples decide to forgo marriage. Often, they want to avoid being kicked into a higher tax bracket, or they don’t want to lose pensions or other benefits from a first marriage. Adult children can be a big factor—they may not want parents to marry again for very practical reasons, such as what will happen to the house or their inheritance. And sometimes, says Sandy, older couples simply "don’t want the hassles and don’t need the presents."

Whether couples eventually decide to marry or not, Tom Blake, author of How 50 Couples Found Love After 50, recommends that they at least try out living together lest they crave the companionship but find out they’re not willing to make the compromises, especially if they’ve been on their own for some time. How is my colleague’s arrangement working out? "Other than the fact that we have completely different eating habits and temperature preferences, the transition hasn’t been difficult at all," he says.

Tax tips. Even if you aren’t pondering a new relationship, taxes are a big issue this month. In her story on last-minute tax savers, Sandy points out that one of the best ways to trim your bill is to open or add to an IRA. You have until April 15 to make a contribution for 2014—not just for yourself but also for a stay-at-home spouse, your children or even your grandchildren if they earned money from a job last year (see 7 Things You Must Know About Funding IRAs). And don’t miss our collection of often-overlooked tax breaks.