Card debt pitfalls for late-in-life marriages
Older couples face a wider range of financial complications
When people marry later in life, they face a wide range of financial complications younger couples don’t. And that’s as true for credit card use as anything else.
The reasons partly have to do with numbers. CreditCards.com resesarch has consistently found people age 50 and older have credit cards more often than younger people.
But more than that, there are all those complexities that arise simply from having lived longer: two individuals with their own long-standing, well-established spending habits and histories, not to mention offspring from previous marriages. Plus, if you are approaching retirement – or have already reached that stage of life – there’s less time to bounce back financially from any setback.
Financial pitfalls of late-in-life marriages
Marrying later in lfe means you have had plenty of time to set your financial habits, enter into complicated arrangements and make mistakes. Here are a few examples:
Different attitudes toward credit card use and debt. Attitudes toward credit cards can vary widely, and you can’t assume your new mate uses plastic the way you do. One spouse may have spent a lifetime regularly revolving a balance from one month to the next, while the other always pays off the bill in total and finds it troubling to have any debt.
“Some people use their cards for emergencies; some use them instead of cash,” says Lili Vasileff, a financial adviser in Greenwich, Connecticut, who specializes in divorce. Once they’ve tied the knot, she says, spouses quickly realize if their new partner approaches credit card usage differently, and it can cause tension.
Credit card debt related to offspring and exes. “Later in life you often have a set of obligations that have nothing to do with the other person you marry,” says Lauren Klein, president of Klein Financial Advisors in Newport Beach, California.
First, there’s the matter of children, particularly offspring who are grown-up. One – or both – new spouses may be helping out adult children. “It’s not uncommon for parents to go into debt for their kids, co-signing a student loan, lending money for a business, helping during a spate of unemployment,” says Lynnette Khalfani-Cox, a personal finance expert and president of TheMoneyCoach.net.
While one spouse may feel obligated to help her children, the other may feel differently. “That other spouse may be more reluctant to assume these debts because it’s not even their child,” says Rosemary Frank, who heads Rosemary Frank Financial, a financial advisory firm in Brentwood, Tennessee.
More complex are issues related to an ex-spouse’s debts. For example, if a new husband had been married before, he may be legally responsible for his former wife’s credit card debt, per their divorce decree, says Khalfani-Cox.
What’s more, no matter what a divorce decree requires, credit card companies can still come after the primary or joint account holder.
“There is a huge disconnect between court orders in a divorce and the credit card contract,” Frank says. The reason: The credit card company was not party to the divorce decree and is not bound by its terms. The contract the card issuer cares about is the cardholder agreement, and if it says you owe the money, you do.
“If you jointly owned a credit card, you are individually and jointly liable for that debt. So credit card companies can come after you,” says Khalfani-Cox.
On the other hand, say you had a credit card in your name only, but the divorce court ruled that your former spouse was financially responsible for part of it and then he or she proceeded not to pay up. From the credit card company’s perspective, you’re the one on the hook and it can pursue you for full payment.
One spouse has a large amount of debt. Spouses may carry big credit card balances of their own into a marriage, or have a low credit score due to previous financial slip-ups. A low score can hurt your chances of being approved for a mortgage or car loan. In some cases, spouses make assumptions about how much responsibility their new partner is willing to take for paying off their debt.
Bethany Palmer, a financial adviser and co-owner of The Money Couple, a website she runs with her husband helping families with finances, points to a couple who married in their 50s. The husband had $200,000 in credit card debt and assumed his new wife, who inherited $500,000 from her previous spouse, would pay off that debt. She had no intention of doing that. After about three years, they divorced.
Another potential problem: undisclosed credit card debt. Khalfani-Cox recalls a couple who married later in life. It wasn’t until he died that she found out he had a large amount of credit card debt left over from before they were married, leaving his estate liable to pay. “That meant less money for the surviving spouse,” she says.
What to do
There’s a lot you can do to protect yourself against credit card-related problems when you marry later in life. For example:
Get it all out on the table and in writing. Both spouses need to disclose everything about their debts – how much they owe, their history of making timely payments – preferably before they marry. It’s also best to review each other’s credit reports. “It’s perfectly appropriate to want to know what you’re getting into,” says Palmer. Also, discuss your credit card use philosophy. With that information, you’re in a better position to decide how to proceed.
Even if you’re not millionaires, you can also consider a prenuptial or postnuptial agreement. That document should disclose all assets and debts, along with the ultimate distribution of your holdings and a revised will, says Frank. The older you are, the more important that is. “Depending how advanced in years the parties are, there is usually precious little time to make up for financial mistakes,” says Frank.
Another potential benefit: Whatever you include in your prenup generally will take precedence in community property states, where debt incurred during the marriage belongs to both parties, no matter who accumulates it.
Keep separate card accounts. If your name isn’t on your spouse’s card, your liability may be limited, depending on whether you live in a community property state. Thus, if your husband’s account is in arrears, and he dies or you get divorced, odds are you will not be held liable, although his estate will be.
“If you’re thinking, ‘How can I protect myself if there are debts from children or exes?,’ keeping your own accounts is probably a good idea,” says Khalfani-Cox.
Work out a plan for paying off credit card debt. Once you’ve both disclosed your debt, you can create a plan to reduce it. Some spouses do help their new partner pay off debt so they can start off on a new foot, Klein says. She worked with a couple who married in their 50s. The wife had more than $30,000 in credit card debt accrued after a previous divorce. The husband agreed to pay if off, so she could put it all behind her.
Still, you need to be careful when paying off a spouse’s debt. “It’s a case-by-case decision,” says Peter Walzer, founding partner of Walzer Melcher, a law firm in Woodland Hills, California.
For example, if a spouse’s debt stemmed from chronic overspending, it’s likely he or she will start ringing up new charges as soon as the old obligations are paid off. In that case, Frank recommends taking such steps as arranging for that spouse to make only minimal contributions to household bills or even using a 0-percent balance transfer card while paying the debt down. Another approach: Put off tying the knot until your future spouse has paid off at least part of the debt.
Another way for creditworthy spouses to help a partner with a bad credit record is to allow them to become an authorized user on one of the good-credit spouse’s credit cards.
When Mary Kaarto, 59, married her husband, John, 10 years ago, she had accrued significant credit card and other debt after being laid off from her job and couldn’t get a credit card in her name. He made her an authorized user of one of his credit cards and, after about a year, she was able to get her own card. She now has three.
Other advantages to taking this route: It’s easy to remove your spouse as an authorized user. But beware: If the marriage doesn’t work out, the primary cardholder is financially responsible.
Use technology to ensure transparency. You can use email or text alerts to make sure both of you stay on top of your credit card use. For example, Khalfani-Cox recommends clients set up alerts through their bank accounts that send email or text messages when each person uses a credit or debit card to make a purchase. It’s a system she uses with her husband to keep track of spending.
Consider Plan B. When marrying later in life, it’s hard not to encounter at least some credit card or financially related challenges. That’s why the best approach may be to keep the status quo. Says Walzer: “If you want to be completely protected, don’t get married.”
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