What are the financial pros and cons of remarrying?

Among the advantages are the companionship, friendship and sense of belonging that has been known to combat loneliness.

Jane Finnerty, joint chairwoman of the Society of Later Life Advisers, points out there can be better health advantages as a result, especially for men as they are cared for better.

This is not just anecdotal conjecture; in 2010, Harvard Medical School published a research paper indicating there were many reasons why married men lived healthier, longer lives.

It stated: "A major survey of 127,545 American adults found that married men are healthier than men who were never married or whose marriages ended in divorce or widowhood."

The Harvard Medical School's study, Marriage and Men's Health, also cited peer research from the Framingham Offspring Study. Harvard's research paper stated: "Marriage is truly heartwarming. Scientists evaluated 3,682 adults over a 10-year period.

"Even after taking major cardiovascular risk factors such as age, body fat, smoking, blood pressure, diabetes, and cholesterol into account, married men had a 46 per cent lower rate of death than unmarried men."

It's important to agree an inheritance plan, particularly for couples with children from previous relationships. Helen Medhurst Jackson

Although when presented with these statistics, my father suggested this would come as a disappointment to men who hate their wives, he agreed (but only when my step-mother glared at him) that companionship later on in life makes for a less isolated, mutually beneficial arrangement.

Advantages to later-life marriage

But the advantages are not merely health and happiness related.

Many people, according to Ms Finnerty, marry because "two live cheaper than one".

She also states: "There are better pension rights potentially, and perhaps some inheritance tax planning for some."

Charlene Coulbeck, senior paraplanner at Informed Financial Planning, states: "Apart from the expense of the marriage itself, generally speaking, marrying has mostly financial advantages."

Tax benefits

Those eligible for married couples allowance can find their tax bills reduced by £336 to £869.50 a year. There are also potential benefits available from the state, such as bereavement payments, bereavement support payment or widowed parent's allowance, depending on circumstances.

But as Keith Richards, chief executive of the Personal Finance Society, points out, marrying can provide couples with even more tax benefits that would not be available to singletons.

These apply to income tax, capital gains tax and inheritance tax (IHT). In a nutshell, Mr Richards outlines these below: 

• Income tax – married couples can apply to transfer 10 per cent of the income tax personal allowance from one to the other. For those couples where one person does not use all of their personal allowance at the moment the benefit will be up to £238. For those born before April 1935, they can take advantage of the Married Couple's Allowance.
• Capital gains tax (CGT) - Assets can be transferred between spouses. Therefore, a married couple can realise gains of £23,400 before capital gains tax is applied (2018-19).
• Inheritance tax (IHT) - Married couples can pass assets onto their spouse on their death without paying inheritance tax. Furthermore, if widows/widowers remarry, with clever planning potentially four nil-rate bands may be available.

Ms Coulbeck also cites the transferable income tax allowance, but caveats this: "The actual money saved is quite low in reality."

With regard to CGT, every individual has their own allowance, currently £11,700 a year. Gains realised within that amount will not incur CGT, while gains over that will incur CGT at 10 per cent or 20 per cent, depending on an individual's tax rate.

However, Helen Medhurst-Jackson, financial planning director at Investec Wealth & Investment, states: "If you are married or in a civil partnership, any transfer of assets between spouses is not treated as giving rise to a gain or a loss. A couple may therefore realise a gain of £23,400 without incurring CGT." 

"Also", she adds, "CGT may be reduced by transferring assets to the spouse with the lower marginal rate, so a lower level of CGT is paid." This does not, however, apply to couples who cohabit.

Ms Medhurst-Jackson also highlights the benefits of transferring any unused nil-rate IHT band between spouses. She explains: "As a couple, only assets in excess of £650,000 will be liable to IHT at 40 per cent.

"The residence nil-rate band (RNRB) also applies to those who are married." 

This is currently set at £125,000 per individual, and is set to rise to £175,000 by 2020. Ms Medhurst-Jackson elaborates: "This was designed to help families pass their home to children or grandchildren.

"Married couples also have inheritance rights in the event of a spouse dying intestate [without a will], but this does not apply to couples who are not married or in a civil partnership."

Pension and investment benefits

Recent softening of the rules around passing on pensions and investments to spouses or stated beneficiaries means married couples can benefit financially from such arrangements.

The former chancellor George Osborne brought in new rules in April 2015, which effectively mean Isa assets can now be passed onto spouses or civil partners and retain their tax-friendly status.

When it comes to final salary pensions, married couples usually receive any final salary pension their spouse has earned on the death of the spouse - although this can be highly contested in the event of remarriage, as a later section on the 'disadvantages' of later-life marriage will outline.

In 2015, with pension freedoms, there was also a softening of the rules around so-called death taxes. Before pension freedoms, people could only pass on their pension pots without their beneficiaries incurring a large 55 per cent tax bill if the pension holder died before age 75, and had not drawn on the funds. 

Since pension freedoms, if the pension scheme member/pension pot owner dies before age 75, their beneficiary or beneficiaries can inherit some or all of the fund as a lump sum, or income from drawdown, tax free, up to the lifetime allowance. This means even if the beneficiary is 22 years old, they could potentially receive income from the inherited pot, tax free.

If the pension pot holder dies after 75, any beneficiary receiving a lump sum will be taxed at the recipient’s marginal rate. The following table from Pension Wise provides a rough indication of the tax treatment of a pension pot. 

Source: PensionWise

According to the research carried out in 2017 by Investec Wealth & Investment, 45 per cent of women said the biggest financial consideration behind the decision to remarry rather than have a common-law relationship was the automatic right to a pension pot on divorce or death.

Long-term care

Mr Richards also points out there is an advantage in terms of state-funded care when it comes to how the home is taken into account by local authorities. 

He explains: "While marital status doesn’t make any difference when it comes to eligibility for local authority funding support, whether or not you're living together does.

"Under the current local authority's means test, it will take into account all someone’s income and assets, but it will ignore the value of the [care recipient's] home if a spouse or partner lives there."

Disadvantages to marrying or remarrying in later life 

However, not everything is rosy in the retiree's garden, not least when the wider implications for extended families and inheritance is taken into account.

Inheritance planning is a vital part of later life planning, but even more so when there may be two or three marriages, and offspring from those marriages, to consider.

This is where financial advisers really come into their own, being able to unravel any potential knots that would otherwise ensnare beneficiaries when a loved one dies.

One of the disadvantages to remarrying in later life is how to manage your family. Jane Finnerty

Ms Medhurst-Jackson comments: "It's important to agree an inheritance plan, particularly for couples with children from previous relationships."

Bloodline planning may be ignored when there is a remarriage in later life. Mr Richards warns this could be, "a potential issue where someone leaves everything automatically to their new spouse in their will, rather than money being passed onto their own 'bloodline'".

He points out that, ordinarily, assets will automatically pass to a new spouse and their children (if there are any) rather than any children from the first marriage.

But when it comes to pension arrangements, trustees may often pay pension assets to the spouse who has been named on the expression of wishes form - and if this has not been updated to reflect a later marriage or civil partnership, the new spouse or civil partner may find there is a costly, legal battle on his or her hands.

Marriage revokes existing wills

Mr Richards explains that, if a new will has not been written up, the estate will be divided according to the rules of intestacy on death. "Although new rules are more favourable to spouses, they may well not split an estate in line with what is needed or wanted," he warns.

Maintenance from any previous divorce ceases with a new marriage.

Ms Finnerty comments: "One of the disadvantages to remarrying in later life is how to manage your family - there is often a fear of losing on their inheritance."

She adds: "Having the conversation with the family can be difficult, but it is important to reassure them that money matters are sorted."

Whether it is addressing the needs or expectations of the family or the new spouse, it is important to protect one's assets.

Informed Financial Planning's Ms Coulbeck explains: "In terms of disadvantages, the key one for me is the lack of protection for your own assets that you bring to the marriage, if you are not careful and do not have a good solicitor and IFA."

She adds: "The courts are becoming more and more favourable towards pre- and post-nuptial agreements and this may be something individuals consider to protect their wealth."

simoney.kyriakou@ft.com