Divorce vs staying married and how it affects your money

Q. My parents aren’t divorced but they haven’t lived together for 20 years. I think they should divorce. They each have new “friends” and estate-wise, I’m not sure what would happen if they stay married. And would a divorce change their Social Security? My mom never worked.
— Son

A. Your parents’ marital status can have a big impact on their finances.

Being married gives certain rights, while having a “partner” who is not a legal spouse can create all kinds of problems.

This can be especially tough if your parents don’t have the correct legal documents, said Jerry Lynch, a certified financial planner with JFL Total Wealth Management in Boonton.

For example, he said, a medical power of attorney gives an individual the ability to get medical information and authorize care for another person.

“Even if you are living together, if you don’t have this, you can’t do anything,” Lynch said.

And if partners are not legally married and they don’t have wills, and if one partner dies, the surviving partner wouldn’t get anything, Lynch said.

The flip side is that if your parents are still married, the surviving spouse would be the primary beneficiary of the assets — which may or may not be your parents’ intentions.

Lynch said with a 401(k), if you are married, your spouse has the be the primary beneficiary unless she or he sits with a notary and gives up all rights to your retirement account. Pensions, generally, would also not cover your parents’ partners.

Then there’s Social Security.

“Generally a spouse is entitled to 50 percent of their spouse’s benefit if they did not work, or if their personal benefit is lower,” Lynch said. “If you remarry, you lose that benefit unless you get divorced — but you would potentially qualify for a spousal benefit with your new spouse.”

If your parents stay married and one parent dies, there’s the widower benefit to consider, too.

Second marriages can be complicated, especially if there are children from the first marriage, Lynch said.

It’s common for spouses in a second marriage to want to financially take care of their new spouse, but when that spouse dies, they want the money to go to their kids from the first marriage, Lynch said. To make that happen, you need very good legal planning.

Whether your parents stay married, split up or stay with their new partners in committed relationships, they should speak to estate and matrimonial attorneys to make sure all their wishes are being established during their lifetimes — before it’s too late.