Clients who have found love in their senior years (after death of a loved one or divorce) often ask whether it is better to marry or simply live together (cohabitate).

The question can raise complex issues in the answer will vary according to the couple’s individual circumstances. Here are some of the main considerations:

Health insurance

How would being married affect each person’s ability to gain, or maintain, health insurance coverage? But would the financial impact be?

Retirement plan rollover rights

One of the most favorable ways to inherit an individual retirement account (IRA) or 401(k) account from another person is by a spousal rollover. A person inheriting as a non-spouse designated beneficiary will be locked into taking required minimum distributions immediately, and throughout the course of the inheritor’s statutory life expectancy.

But a surviving spouse can roll over the deceased spouse’s retirement plan and make it their own retirement plan. The surviving spouse can then defer taking distributions until after age 70½, if that applies, and can have all the other advantages that come with owning your own IRA or 401(k) plan. There can be significant financial and tax advantages to rolling over the retirement plan.

Survivor pension benefits

If a widow or widower is receiving survivor pension benefits, check to see if those would end in the event of remarriage. If so, the loss of that income will be a significant disincentive to marrying again.

On the other hand, marriage might mean that the new spouse will enjoy the benefits of a survivor pension from the new marriage. Now the benefit is in the marriage “plus” column.

Income tax

A married couple could enjoy certain tax advantages. For example, a spouse without a job could contribute to an IRA and therefore enjoy tax-deferred savings toward retirement. On the other hand, the combination of two incomes can sometimes make it harder to reach threshold levels for deduction of expenses. The “marriage penalty” complained of by married couples for years has largely been addressed by Congressional action.

You may need to utilize the services of a CPA or tax preparer to help with analyzing income tax consequences.

Federal estate tax

Marriage has a favorable impact on federal estate tax because of the deduction for property passing to the surviving spouse. In rare cases, questions about how unused exclusion amounts from a deceased spouse may be used in the future under so-called “portability” rules will require extra attention in the case of remarriage.

­ Pennsylvania inheritance tax

Another tax advantage is the Pennsylvania inheritance tax rate at which the surviving spouse will inherit from the first spouse to die. If the two persons were merely cohabitating, and were not spouses, then any assets left to the survivor would be taxed at a rate of 15%. But a surviving spouse inherits at a 0% tax rate. So on a $2 million inheritance, status as a spouse will save the survivor approximately $300,000 in Pennsylvania inheritance tax.

Protection of assets under Medicaid rules

For many middle-class clients, a major consideration in retirement years is payment for long-term care. Nursing home care, in particular, can significantly drain a client’s life savings since the average cost of such care in Pennsylvania is now more than $9,000 per month. As a result, many clients spend down assets to qualify for Medicaid benefits, which will pay for the cost of nursing home care.

Medicaid rules offer significant advantages to the spouse of a Medicaid applicant, known as a “community spouse.” The first such advantage is that the community spouse can keep half of the couple’s non-exempt resources, up to a maximum in 2016 of $119,220. Current rules and case law also allow non-exempt resources to be used to purchase a Medicaid-qualified annuity for the benefit of the community spouse under many circumstances.

An example shows how the Medicaid rules can help protect assets for the benefit of a community spouse. Suppose Joe owns a house, a late-model car, and $200,000 in a money market account. He lives with Matilda, who has no significant assets. If they are not husband and wife, then Joe will need to spend his money market account down to no more than $8,000. His house and car are exempt during his lifetime, but will be subject to repayment of Medicaid costs once Joe dies. If Joe receives Medicaid for several years and then dies, Matilda could find herself with no house or car, and less than $8,000 received from Joe.

On the other hand, if Joe and Matilda were married, Joe could transfer ownership of the house and car to Matilda with no Medicaid penalty. Matilda could also receive $100,000 of Joe’s money market account as her community spouse resource allowance. While Joe could buy himself an irrevocable burial reserve under either scenario, he will also be able to buy a reserve for Matilda if they are married. For Allegheny County residence in 2016, the combined amount for two burial reserves exceeds $34,000. It is also quite likely that Joe could use the remaining funds in his money market account (not counting the $8,000 he can retain) to purchase an immediate annuity that would pay income to Matilda during her life expectancy.

Therefore, Matilda substantially benefits as Joe’s spouse during the spend-down process. She receives a house, car, and more than $100,000 in financial benefit. As a non-spouse, Matilda would be impoverished.

On the other hand, Medicaid rules can put a spouse’s assets at risk of spend-down, when they would not be if the person were a mere cohabitant. Going back to the example of Joe and Matilda, suppose that Matilda went to the nursing home first. If they were unmarried, Matilda would likely qualify for benefits immediately and none of Joe’s assets would be counted. If they were married, though, Joe’s money market account would be counted as a non-exempt asset. He could likely still have the same ability to protect that $200,000 that Matilda used in the example above, but he may not be happy that he has to go through the division and spend-down of his own savings.

Veterans benefits

Marriage can also affect qualification for “aid and attendance” benefits available to help wartime veterans pay for long term care. A veteran with a dependent spouse will receive a higher monthly benefit than a single veteran. The widow or widower may also be entitled to benefits.

However, if someone who is considering remarrying is already the widow or widower of a wartime veteran, the ability to get benefits could be lost if he or she marries someone who is not a wartime veteran.

As with Medicaid benefits, one must meet financial qualifications to receive aid and attendance benefits. Assets and income of both spouses will be considered. This factor may or may not have an effect on the decision to marry, depending on the numbers involved.

Non-financial benefits

Finally, marriage provides certain non-financial benefits that a couple may wish to enjoy, such as social recognition, religious recognition, and the security of an intact family if there are children involved.


You should consult an attorney well versed in elder law and/or family law for guidance in deciding whether to marry or cohabitate, and for help structuring a prenuptial or cohabitation agreement.

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