How to Manage Finances, Romance After 50

Creating a will and a trust can work the same as a pre- or post- nuptial. Remember that relationships with stepchildren take time; issues associated with stepfamily formation are so formidable that it can take five to seven years for families to reach equilibrium. But the financial obligations and priorities should be made clear from the outset.

I am not a fan of inheritances and favor inter-vivo transfers instead — giving while you’re living. Incorporating kids into the monthly budget and savings decisions makes the obligations transparent for everyone.

Second, as your feelings are processed, construct a budget. Most of your cash flow will be in a joint account. And separate accounts can keep each partner’s assets and liabilities distinct.

Third, address long-term care risk. Less than 4% of people under the age of 80 need physical care for daily living and only 20% of those over age 85 need long-term care. Late-life romances present the tail risk of caring for a partner with an extended infirmity.

Insurance is usually the answer for tail risk but long-term care insurance in this nation is private and too costly. So people have to self-insure. Being each other’s financial and health-care power of attorney helps protect both partners when one becomes incapacitated.

For the reader who emailed me, it makes sense to square up the ownership of the house. The house is now worth double what they paid for it. He put in $500,000 and she put in $250,000.

She owes him $125,000. She could sell or borrow from her other property, which has also soared in value. (Or they could simply change the ownership structure, so that he owns a larger proportionate share of the equity. Lawyers can sort this.)

At heart is that he wants to spend some of those millions in home equity before he dies. I wish reverse mortgages were decent; like long-term care insurance, associated costs are just too high. The government should provide not-for-profit insurance for both risks.

In a dream world, each person in a partnership would have equal income and assets, and no pre-romance obligations. In the real world, an explicit system of contributions will bring forth feelings of care and fairness.

While each partner may have their own legacy goals, frank discussion on this topic establishes trust. Money conflicts are usually proxy wars for feelings about being cared for and loved.