The pros and cons of getting married in later life

We're a nation of old romantics according to the latest marriage statistics. The figures, compiled by the Office for National Statistics (ONS), show that almost 33,000 people aged 55-plus said ‘I do' in 2012. In addition, the largest percentage increase in the number of weddings between 2011 and 2012 came from men and women aged 65 to 69, up by 25% and 21% respectively.

But while getting married in retirement could be great for your lifestyle and general happiness, it's important to think about the financial consequences too.

It may not be the most romantic aspect of your wedding planning but there are potential pitfalls that could dampen the ardour of even the most loved up couple – particularly if you have children from a previous marriage.

From tax and long-term care to pensions, wills and inheritance tax (IHT), we examine the issues you need to be aware of before you tie the knot.

To honour and obey (the taxman)

Beneath his tough exterior, the taxman is actually rather partial to a bit of romance, with married couples able to take advantage of several tax breaks.

If either of you were born before April 1935, you can take advantage of the Married Couple's Allowance, which can cut your tax bill by between £314 and £816.50 in the 2014/15 tax year.

Income tax breaks are being offered to younger couples from April 2015 too, in the shape of the transferable tax allowance. This allows you to transfer 10% of your personal allowance – £1,060 in 2015/16 – to your partner, effectively saving up to £212 in tax each year.
The catch is that it's only available where neither of you are higher-rate taxpayers.

A potentially more attractive benefit results from the ability to transfer assets between married couples and civil partners free of capital gains tax (CGT) and IHT.

On the CGT front, a bit of pre-sale transferring can double the annual allowance to £22,000 in 2014/15. This could save you up to £3,080 in CGT, depending on the size of your gain and your income tax position.

Being able to transfer assets IHT-free can be an even bigger boon. "Where an unmarried couple jointly owns a property, although ownership can go to the surviving person on first death, the value of the deceased's share will be part of their estate and potentially liable for IHT. This could mean they have to pay a large bill to stay in the home," warns Danny Cox, head of financial planning at Hargreaves Lansdown.

"If they're married, there's no IHT liability on this transfer and therefore no bill."

In addition, as the surviving spouse inherits any unused nil-rate band, this effectively doubles the amount that can be left IHT-free on second death.

For richer, for poorer

Your marital status can also affect your pensions and investments. Many pensions can be left to a loved one, married or otherwise, when you die. Julie Hutchison, family finance expert at Standard Life, recommends checking your plan's small print if your significant other changes.

"The pension trustees will look at your family affairs on death with regard to who you have nominated to inherit your pension on your expression of wishes form," she says. "They have the discretion to overrule this, so it's worth ensuring it's up to date."

While your marital status matters less with a pension, being married now offers a major benefit for couples who have Isas. In his Autumn Statement, the Chancellor announced that spouses and civil partners widowed from 3 December 2014 could inherit their partner's Isa wrapper.

Although the rules are still to be finalised, it is expected that the surviving spouse will be able to increase the amount of assets they shelter within an Isa by the value of their partner's Isa at death. To gain this valuable tax perk, it won't be necessary to leave them the assets within the Isa.

In sickness and in health

When it comes to your rights if you become unwell, it makes little difference whether you're married or not. Most organisations, including hospitals and doctors, will accept you as next kin without a wedding certificate so you can be there for each other in times of need.

Your marital status doesn't make any difference when it comes to long-term care costs, either. Whether or not you're living together is the key determinant. Under your local authority's means test, it will take into account all your assets, ignoring the value of your home if a spouse or partner lives there.

Whatever your marital status, it's also sensible to have a power of attorney. This is a legal document that allows you to nominate someone to look after your affairs, including your finances, if you're unable to do so yourself. "You might want to put your partner and your kids down," says Hutchison. "This gives you peace of mind that you'd be looked after if you were unable to do so yourself."

How many people wed aged 55-plus in 2012

55-59 8,150 5,890
60-64 5,640 3,450
65-69 3,520 1,990
70-74 1,490 870
75-79 780 350
80+ 500 150

Source: Marriage summary statistics 2012 (provisional) for England and Wales, ONS

Till death us do part

Whether you're married or not, what happens when one of you dies is where it can get tricky. "Most people will want to pass their assets down their own bloodline," says Cox. "Unfortunately, if you die first and leave everything to your spouse or partner, there's a risk that your kids won't receive a penny."

How you avoid this can depend on how much is in the pot. For example, if you're both financially independent and your assets aren't too entwined, it may be possible to leave everything to your kids without affecting your partner's standard of living. However, if, as is often the case, your jointly owned property makes up the majority of your assets, leaving something for the kids while also ensuring your partner isn't destitute requires some planning.

Carla Brown, partner and head of will, tax and trusts at solicitors Moore Blatch, says the usual option for couples wishing to balance these two objectives is to use their wills to create a life interest trust. "These are flexible so you can stipulate the terms you want but it will give the surviving person a life interest in some or all of your estate," she explains. "This could mean they're able to stay in the home or receive an income from other assets but, once they die or go into care, it can go to the kids."

Life assurance, in the shape of a whole-of-life plan written in trust, could also be used to enable a couple to extract an inheritance for the deceased's family on first death. While this can help to safeguard this inheritance, Cox says there are pitfalls: "It's still possible when you're in your sixties but once you get older it can become prohibitively expensive."

While what you need to do to divvy up your estate can get complex, when it comes to your will, financial planning requirements are pretty straightforward – if you get married, you need a new one.

"Marriage totally revokes a previous will," says Brown. "If you don't get a new one, your estate will be divided according to the rules of intestacy when you die. Although the new rules are more favourable to spouses, they are unlikely to split your estate in line with what you wanted."

I do or I don't?

Deciding whether to marry in later life is far from a simple matter from a financial perspective. While there are a number of potentially attractive tax breaks, such as the transferable income tax allowance, Isa wrapper inheritance and IHT and CGT-free transfers, whether you decide to get married or live together makes little difference for many of the major financial challenges.

As an example, take estate planning. Although IHT- free transfers between spouses make it easier to shift assets around when one of you dies, if you have a family from a previous relationship, you still face the same predicament, and potential solutions, when it comes to dividing your wealth.

Likewise, as long as you live together, your local authority won't give two hoots whether you're legal or not when it comes to assessing your ability to pay for a care home.

But, although there are financial implications associated with marriage, deciding whether or not to tie the knot is rarely just about the money. "We do see clients where we would recommend marriage as a way to avoid a large IHT bill on the home they share," says Cox.

"But, ultimately, it's a matter of personal preference, not one of personal finance."

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