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Protect Your Finances When Entering a New Relationship

After a "Gray Divorce," Protect Your Finances When Entering a New Relationship

by Don Drake, Connelly Law Offices, Ltd. 3.28.24

Medicaid Planning Rhode Island
Attorney RJ Connelly III

"In our previous blog, we emphasized the significance of designating beneficiaries and regularly reassessing these decisions as we navigate the various stages of life. Today, our focus shifts to the concept of the gray divorce, a term that pertains to the surging divorce rates among older couples in the United States, particularly those belonging to the baby boomer generation, who have been married for many years," stated professional fiduciary and certified elder law Attorney RJ Connelly III. "Divorces within this demographic have notably increased since the 1990s. Research published in the Journals of Gerontology in September 2022 revealed that over one in three individuals who undergo divorce in the United States are over the age of fifty, marking an almost threefold surge compared to the rates in 1990. A prevalent reason behind this trend is that couples, upon the departure of their children from home, often realize that their shared focus on raising kids played a pivotal role in their marriage. Confronted with an empty nest, many couples lack common ground and are unwilling to spend their precious later years in unfulfilling relationships. Without meticulous planning, divorce can have severe financial ramifications for these individuals. Additionally, today's blog delves into ways to protect your finances when entering a new relationship."

The 'gray divorce' presents complex issues:

  1. Couples are typically near retirement or already retired.

  2. They have grown children and grandchildren.

  3. They want to provide a legacy and face a complex division of assets accumulated due to a lengthy marriage.

"One of the most important issues in such a divorce is ensuring financial security for both individuals in any potential future relationships," said Attorney Connelly. "This involves implementing measures to safeguard all parties' financial stability and well-being. Let's look at some of the issues that need to be addressed."

Adding Financial Obligations

"In addition to the increasing divorce rates, there is a noticeable decrease in marriage rates and a rise in cohabitation among older adults," points out Attorney Connelly. "This trend poses distinct challenges for seniors who opt to enter into new partnerships without getting remarried. New couples may have to navigate the financial responsibilities of supporting their previous partners."

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"Gray Divorces" at an all-time high

In certain states, alimony payments may continue indefinitely unless the recipient chooses to remarry, which can strain finances and potentially postpone retirement plans for both parties. This could even lead some individuals to re-enter the workforce to manage these financial obligations and put the couple's plans on hold for a significant time.

Consult an Elder Law Attorney

Attorney Connelly advises that if you are going through a gray divorce, it's crucial to involve your estate planning attorney in pre-divorce decision-making. This will allow for the necessary amendments to your pre-existing plans without completely disrupting your future financial security. Additionally, if you are among the nearly two-thirds of Americans without a will and estate plan, now is the time to create one.

"For those entering this new financial reality, it's important to carefully consider combining finances with a future partner, especially if you have known them for only a short period before deciding to move in together," said Attorney Connelly. When starting a new romance as an older adult, you may want to consider the following:

  1. Cohabitation agreements address living arrangements, property ownership, and financial responsibilities.

  2. Full financial disclosure, including outstanding debt, to ensure transparency and open communication about each other's financial situations.

  3. Opting to maintain separate finances to protect your existing estate plan and legacy.

"Putting these protective documents in place should not be viewed as negative but rather as a means to help a new couple participate in a fresh start together," stated Attorney Connelly. "Furthermore, if you have plans for future marriage, developing a prenuptial agreement to safeguard individual assets, retirement funds, and legacies is crucial."

Why Not Comingle Accounts?

"Cohabitating for an extended time, even ten or twenty years, does not automatically establish a common law marriage," Attorney Connelly said. "To maintain independence from your partner's financial responsibilities and liabilities, it is crucial not to commingle assets and accounts while living together. This means refraining from making payments or deposits directly into your partner's accounts, including through financial apps like Venmo. Keeping separate banking and credit card accounts is essential to ensure financial autonomy."

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Consider a Living-Together Contract

Cohabitation Agreements

An elder law attorney can assist in creating a cohabitation agreement designed to safeguard individuals from their partner's financial obligations. Attorney Connelly explained, "We can help evaluate your partner's approach to risk, debt, and credit history. A partner's unfavorable credit score may impact couples who maintain separate bank accounts. Open and honest communication, sharing financial documents, and providing credit history will aid in assessing whether your new partner could pose a financial risk to you."

A Living-Together Contract, or cohabitation agreement, is a legal document that addresses various issues a couple deems necessary for living together. These agreements most often include details about financial arrangements, property ownership, responsibilities for household expenses, and arrangements for what happens if the couple separates. Below are some items that should be included in that document.

Financial and property clauses

These include individually owned property, assets obtained before the commencement of the new relationship, and assets acquired by either or both partners during the partnership.

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Will the new relationship last?

Property ownership

When you enter a relationship and choose to cohabitate, it's easy to believe that you'll always remember who originally owned each item. However, as years pass and you start referring to everything in your home as "ours," your memory might not accurately reflect the true ownership of things.

Gifts received or property inherited during the relationship 

Many people prefer to keep these assets separate when managing inheritance and gifts, especially if there are already established estate plans for their children's inheritance. It's important to note that any gift a couple receives is considered jointly owned, which can affect how it is managed and distributed.

Property purchased during the relationship

When two people purchase items together as a couple, it's crucial to establish a transparent approach to joint property ownership. This involves identifying which items are owned separately and shared based on each person's contribution to the purchase. It's important to document this decision-making process in writing to maintain a record of property assessments. Remember, it can be difficult to prove later if not written down.

Medicaid Planning Rhode Island
Keep records of all transactions


In different relationship structures, the division of daily living costs, such as housing, utilities, and food, can be categorized based on responsibilities. One approach is to have a single checking account where both partners deposit their paychecks or benefit checks to cover these expenses. Alternatively, couples may split expenses 50-50, keeping detailed records of daily living costs and totaling their contributions over time to address any discrepancies in spending. Another option is to contribute proportionally to income, which can be particularly beneficial for couples with significant differences in their earnings. This method ensures that expenses are divided based on everyone's financial capacity.

Separation or death 

When creating a living together contract, it's essential to include a detailed outline of protocols regarding what happens in the unfortunate event of a partner's passing or if the couple decides to end the relationship. Several options are available for addressing these scenarios, and our office can assist in drafting this provisional agreement while ensuring it aligns with your existing individual estate plans.

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What if things go wrong?

Dispute resolution 

In cases where a couple has a living together contract, they need to establish a straightforward method for resolving any potential disagreements that may arise in the future. Typically, mediation is the preferred option for resolving disputes, and the contract should outline the process for selecting a neutral third party to facilitate the mediation. If the mediation process does not lead to a resolution, the agreement may also specify that the dispute will be referred to formal and binding arbitration. By establishing a method for dispute resolution, the couple can effectively avoid the complexities and costs associated with potential future lawsuits.

Future marriage 

The "living together contract" becomes enforceable after marriage only if it was created shortly before the marriage. If you're considering this option, you should schedule a meeting with your attorney to discuss the details and bring any relevant elements of the "living together contract" to formalize it into a prenuptial agreement.

A Final Word

"With the growing prevalence of 'gray divorce' and cohabitation among older couples, we must acknowledge this trend within the context of the 'Graying of America' era," stated Attorney Connelly. "This paradigm shift is anticipated to endure for the foreseeable future. To protect the financial interests of new couples, it is imperative to establish the framework of the new relationship judiciously. While it may not inherently exude romanticism, taking measures to safeguard assets, strategize for retirement, and address forthcoming financial obligations will foster a more resilient and secure future for all family members, ensuring a lasting legacy."

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Please note that the information provided in this blog is not intended to and should not be construed as legal, financial, or medical advice. The content, materials, and information presented in this blog are solely for general informational purposes and may not be the most up-to-date information available regarding legal, financial, or medical matters. This blog may also contain links to other third-party websites that are included for the convenience of the reader or user. Please note that Connelly Law Offices, Ltd. does not necessarily recommend or endorse the contents of such third-party sites. If you have any particular legal matters, financial concerns, or medical issues, we strongly advise you to consult your attorney, professional fiduciary advisor, or medical provider.

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