My question is about marriage and how best to protect my assets and Social Security benefits if I divorce again.
I am 54 years old. I have two older sons and have been divorced twice before. I own five properties in Washington state worth about $2 million. My 401(k) is worth $350,000. I make $150k a year in my sales job and rent from my own properties. Eventually, I would inherit two more properties in Washington state and some stock worth about $1 million. I have paid into Social Security for 38 years and will get close to the maximum payment.
My 52 year old friend has her own house, worth $500,000, and wants me to move in and marry her. I don't buy this idea, because it puts me at financial risk. But I don't like the idea of dying alone either. She has shares worth about $100,000. Her jewelry company has debts of $150,000 and inventory assets of $20,000. She is barely afloat and makes a profit of $20,000 a year. I have only paid into Social Security for 11 years.
She has never been married and has no children. She comes from a wealthy family and will receive a large inheritance in 20 years or so. If I marry her, how can I protect my assets and Social Security benefits in the event of a divorce? Revocable trust? Irrevocable trust? Pre-marriage? I've heard horror stories about people, mostly men, losing half their Social Security in divorce. I plan to work until I'm 70 years old. I plan to leave the vast majority of my assets to my children.
You don't want to die alone and broke in Washington state
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“Washington is a community property state, so anything you bring into the marriage is separate property, while earnings during the marriage are considered marital property.”
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Dear no,
You cannot lose your Social Security benefits in the event of a divorce. You paid for them, and they are yours. The divorce court can take your benefits into account when dividing assets, but you have paid into this program for the past 38 years, and those benefits are yours alone. If you divorce, your spouse can receive her own benefits based on your Social Security contributions, but only if you were married for 10 years and did not remarry and are 62 or older.
Washington is a community property state, so anything you bring into the marriage is separate property, while earnings during the marriage are considered marital property. These assets will likely be split 50/50 in the event of divorce. Gifts and inheritances are an exception to this rule. If your spouse inherits $1 million during your marriage, for example, that money belongs to your spouse. As for whoever inherits, he must prove that the gift was his alone.
You are also living in a “committed intimate relationship.” “These relationships exist when an unmarried couple has lived together for a long period of time and are in what would be considered a marriage-like relationship,” according to Dellino Family Law Group, with offices in Bellevue and Seattle. “In Washington state, these relationships have property and other rights similar to those of married couples.”
“It is important to know and understand the implications of living with an intimate partner in Washington so you can plan accordingly or know what rights you may have when a relationship like this ends,” the law firm adds. “Cohabitation laws apply to all couples who meet the legal requirements for committed intimate relationships, including opposite-sex and same-sex couples.”
Assuming you live together and are not married, a cohabitation agreement will accomplish many of the goals of a prenuptial agreement for married couples. “You can decide how to divide property and protect yourself from allowing your partner to get a share of your property in the event of a separation,” Delino adds. “Coexistence agreements protect both parties and act as insurance.”
Prenuptial agreement versus trust
You can place your rental property in a revocable trust to bypass probate; It will require paperwork and expenses. If you are married, avoid using marital funds to make major improvements to that property. Unlike rental properties, you can't put your 401(k) into a revocable trust. This means the account will need to be renamed, which could result in significant tax consequences. Listing your children as beneficiaries will do the job in the same way.
A prenup can address debts that a spouse brings to the marriage, and as such, may be better than a trust in this case, says Neil V. Carbone, Trusts and Estates Partner at Farrell Fritz PC. “Another benefit of a trust prenuptial agreement is that it will require an open discussion and final agreement between them — and, in most states, with the benefit of their separate attorneys — so there should be no surprises down the road.”
Irrevocable trusts are suitable for individuals who have accumulated significant wealth. The federal estate tax threshold for 2024 is $13.61 million for individuals and $27.22 million for married couples, so you won't need to pay federal estate tax on amounts less than that. It doesn't look like you'll benefit from Medicaid, so an irrevocable trust won't help you there, and if you create one you'll lose control of your assets, as the name “irrevocable” suggests.
“A properly drafted irrevocable trust that is created and funded before marriage should protect assets from the spouse as well as creditors of both spouses,” Carbone adds. “However, an important consideration is that ownership of the assets must be effectively and irrevocably transferred to the trust in order to protect them. The grantor must relinquish control of the trust property to the trustee, who will determine if and when a distribution will be made.”
“Also, not every state allows so-called ‘self-settled’ asset protection trusts, that is, trusts where the grantor can also be a beneficiary of the trust with protection against the grantor’s creditors,” Carbone adds. “Asset protection funds can also be set up offshore, but doing so usually involves increased costs, which may be justified when large assets are at stake.”
Reasons for marriage
What is the answer if you get married? Financially, a revocable trust, last will and testament, and prenuptial agreement should protect the lion's share of your assets, and can set guidelines for alimony and debts. But a prenuptial agreement must be fair and equitable, and it must be transparent about the assets and liabilities held by both parties. It should also be entered into without coercion. There is no guarantee that a prenuptial agreement will be enforced, but writing it under the guidance of an attorney will help.
Speaking of coercion, marriage due to one party’s desire to marry is not a reason for marriage. Getting married because you don't want to die alone is not a reason to get married. Getting married because you've been married twice before and it's third time lucky, and because it seems like the right thing to do if you're dating someone, is also not a reason to get married. There is no reason for you to get married a third time if this is not something you want to do.
Love is a good reason for most people to marry — and there are tax advantages, too — but you can love someone outside of marriage. This is a financial advice column, but it's often a relationships column disguised as a financial advice column, because it deals with marriage, divorce, death, taxes, inheritance, and families.
Signing a marriage contract is a big step, and as you discovered, it is one of the most important contracts you will sign in your life. Financially, it simply may not benefit you. Like I said, you also need to be aware of the laws in your state regarding unmarried couples. do you love her? That was not the word that appeared in your letter. Is love enough for you to be able to navigate this relationship?
If you're not marrying for love, which you've discovered from your previous marriages can develop over time, or financial security, as many people do whether they want to admit it or not, are you marrying for companionship? Do you want to have someone who wakes up in the morning and comes home at night? I have been married twice before. Let this be your guide as you make your decision.
Just make sure you're getting married for the right reasons before taking this step.
You can email The Moneyist with any financial and ethical questions at qfottrell@marketwatch.com, and follow Quentin Fottrell on X, the platform formerly known as Twitter.
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