Second Time Around
Financial Planning for Remarriage
In 40% of marriages in 2013, at least one partner had been married previously, according to a Pew Research Center analysis of census data. Some surveys say that an even higher percentage of remarried couples will end in divorce. Therefore, it is ever-important for these new families to discuss upfront how they will handle the merger of their financial lives.
There are a few key items for both spouses to address to help spell out their financial situation.
Take inventory. It’s important to ascertain the assets and liabilities each partner brings to the marriage, and agree how they will be handled. How much debt does a future spouse carry? Who will be responsible for managing it? They should agree on an approach toward servicing any debt. If you have a poor credit history, your future spouse should know now. Better to avoid a potentially embarrassing situation when you apply for a loan later.
Similarly, if one spouse brings significant assets to the marriage, both partners should discuss how these assets are to be treated. In the event of one spouse’s passing, what assets should the surviving spouse receive? What assets should be left to children from a previous marriage? These are issues to be resolved upfront to avoid misunderstandings and complications later on.
Complete any paperwork. After both partners have reached a consensus on how to handle these financial issues, it is important that the paperwork is filled out properly. Otherwise, they may find that despite their careful planning, there are potential unintended consequences. For example, if a former spouse remains listed as the beneficiary of a retirement account, he or she may still receive the asset — even if this wasn’t the benefactor’s intent.
Consider a prenuptial agreement. While a prenuptial agreement may not be the most romantic gesture, it can be a wise move. This is especially true when one spouse would like children from a previous marriage to receive or inherit certain assets brought into the new marriage; for example, a business or personal property. If these objectives aren’t spelled out, the assets may not pass down as intended. The goal is to make financial matters clear and simple upon a spouse’s passing or should the marriage end in divorce.
Seek legal advice. Laws regarding the treatment of assets in a divorce or remarriage are complicated and can vary by state. It is important to seek expert legal advice as this can minimize the risk of unwelcomed surprises.
Plan for the long haul. Spouses should openly communicate their ideas and approaches to earning, spending and saving. While two people rarely completely see eye to eye, each should recognize how the other approaches financial decisions.
When it comes to preparing for marriage or remarriage, communication is a key ingredient. Prospective spouses should identify issues, discuss ways to bridge gaps, check for any legal and financial implications, and, finally, find common ground they can agree on.
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