By Quentin Fottrell, MarketWatch
I am a 54-year-old widow of six years, with average savings and a home (free and clear) that was paid for by me and my late husband. I am now engaged and need advice on how to move ahead with our finances. My fiancé has a good job and savings. He will be moving into my home, but we plan to make improvements to the home together.
We both have one child. I want what my first husband and I have worked and paid for to be inherited by my daughter. How should we handle the improvements to the property? Do I write a will stating the value of the home before those improvements should be inherited by my daughter, and the amount of the improvements be split between our children? Do I add him to the deed after the improvements? I want him to have lifetime use of the home.
I also draw monthly income from late husband’s retirement, which usually puts me into a higher tax bracket. We are trying to decide if it would be best that we not get married because of tax purposes and continue to file as single people. Or should we decide to marry and file married filing separately or married filing jointly? The retirement funds I draw from my last husband would be included in my taxable income. Together, we would have an annual income of approximately $150,000.
Engaged in Tennessee
Congratulations on your engagement. Some people are lucky to find love once in their lifetime. You found it twice. I applaud you on your willingness to start life anew and to embark on a new adventure.
Before you get married and/or pursue a financial life together, I urge you to seek legal counsel. Tennessee is a separate-property state, and your home is currently considered separate (rather than marital) property. In community-property states, there is a 50/50 right to marital property. In separate-property states, that property is typically divided in a court of law if the couple divorces.
If you move into your home together after you are married and you renovate your home together, pay for those renovations out of a joint account and/or refinance your home from a joint account, your home becomes marital property. In other words, you cannot make a will to leave your home to your daughter if your new husband owns half of it. On that note, do not add him to the deeds.
I recommend a prenuptial agreement, but there is no guarantee that such an agreement cannot be challenged in a court of law if the home you owned with your first husband is “commingled” (that is, becomes community/marital property instead of separate property post-renovation). A lawyer will advise you on the details, but I advise you to tread very carefully on renovating this home together.
You don’t say what property your fiancé brings to the marriage. Assuming he has a home, he should protect that asset too. If he does not have his own home, you can write a will leaving him the right of survivorship in your home, meaning he has the right to live there for the remainder of his life, assuming you predecease him, and your daughter inherits your home in its entirety.
Marrying again before the age of 60 can also be tricky. Your Social Security survivor benefits will be affected if you marry now. You qualify for survivor benefits if your previous marriage lasted 10 years, you are 60, you remain single or, if you do remarry, you only did so after you turned 60 (or 50 if you have a disability). A second marriage for you requires careful planning.
Don’t make any hasty decisions. You are in love again, and that’s the most important thing. If you are on a pink cloud, it can be intoxicating. When you notice how your spouse chews their food, picks Cheerios out of their teeth, yawns like a bear emerging from hibernation or snuffles loudly instead of using a tissue, that’s when you wish you had seen a lawyer before a justice of the peace.
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