To Have and to Hold, Again

Life Events

To Have and to Hold, Again

For a variety of reasons, second (or third) marriages are becoming the norm.

November 19, 2014

For a variety of reasons, second (or third) marriages are becoming the norm. With them come blended families with ex-spouses, stepkids, half siblings and a whole new financial picture. We’re not discounting the power of love, but if you’re contemplating getting married again, there are questions you need to ask – and answer – to help your new marriage withstand some of the common pitfalls that can trip up a relationship.

Financial and estate planning issues can drive a wedge in a new marriage and should be resolved before uncertainty turns into resentment. Before you sit down to talk about what cake to serve and whom to invite, make time to talk about your new financial realities so you’ll start your married life on the right foot.

Let’s take a look at some of the practicalities you should cover as you embark on your journey together.

What are your priorities?
In any new marriage, you’ll need to establish your joint financial priorities and set the wheels in motion to try to achieve them. It starts with taking inventory of your collective assets and liabilities, property, insurance coverage, banking, retirement and brokerage accounts – pretty much anything that has to do with money.

Marriage is about love and trust, so when you’re discussing money matters, you’ll have to talk about your debt and obligations, too. Discuss how much debt you each have, your credit histories, and what exactly you owe to other parties. What if alimony isn’t enough for an ex who constantly demands more? Or you use debt to buy lavish gifts for your children out of guilt after the divorce? Your intended should know about those payments so you can work together on a plan to take care of your family without jeopardizing your financial future together.

You’ll also want to think about how much each of you will contribute if there are disparities in income and to what accounts (his, hers and ours, perhaps?), as well as how you’ll pay for your children’s needs and bills you incur as a family. Make sure to reestablish a “rainy day” or emergency fund, especially if your divorce took a toll on the funds you had saved. Consider setting aside some money for the fun things in life, too, like travel, concerts and dining out.

It’s a good idea to meet with your professional advisors and review what you’ve accumulated individually and how to put those assets to use to help you achieve your joint financial goals. This is the time for full disclosure and getting on the same page. Whatever you decide will guide your planning decisions when it comes to investments, budget and your savings.

Where are you going to live?
This is more than deciding which one of you will move. It is typically one of the largest expenses in a budget. You’ll need to decide what to do with any other homes, how you’ll divvy up expenses – including the mortgage and insurance payments – and whose names will be on the deed. And, like all cohabitating couples, you’ll have to find middle ground as to how the house will be managed and who’s responsible for utilities, repairs, maintenance, renovations, insurance and taxes.

Who gets what, when?
Getting married – whether for the first, second or any other time – is one of those life events that should automatically trigger a review of your estate planning documents. It’s an opportunity to review your will, trust documents and beneficiaries on everything from your financial and retirement accounts to insurance and annuities, as well as determining how your property will be titled.

In the event of your death, you’ll want to determine how your new spouse, existing children and any subsequent children will be provided for and how you will divide assets from a previous marriage. You’ll also need to think about what happens to assets you accumulate during your marriage. Things can get particularly complicated if you own a business together. So it’s essential to have documentation in place to protect all parties involved and to ensure that neither your children nor spouse is in a position to disinherit the other.

If you have children from a previous marriage and want them to inherit the home they grew up in, you’ll need to give some thought as to what will happen to your spouse after you pass away. Will he or she have the right to continue living in the home? Can the children sell the home without letting your surviving spouse have a say? Can the survivor remarry and live there with his or her new spouse? There are several legal solutions to this dilemma (e.g., assigning right of occupancy, co-owning the property, holding the home in trust), so it’s best to work with a qualified attorney to determine who will inherit and under what circumstances. Your financial planner can help coordinate the discussion.

What about retirement?
When planning your financial future, retirement can and should be a big part of that. Of course, there are a number of factors to consider. And some depend on the divorce decree from the first marriage. Did the first spouse claim half of the retirement assets in the divorce? If so, that means you may have less to retire on as a couple, and you’ll need to plan for that.

Who has control?

Unless you have a durable power of attorney or healthcare proxy stating otherwise, your spouse is likely to take over any financial or medical decisions should you become financially, mentally or physically incapable of taking care of yourself. If you prefer an adult child or other family member make those decisions, put it in writing and let them know your wishes. Remember, too, to update these documents in case of a divorce unless you want your ex in control of your health and money decisions.

Social Security benefits also come into play, particularly if you’re considering marriage later in life. Social Security rules allow exes and widows/ widowers to collect benefits on their previous spouses’ records under certain circumstances. But remarriage generally means you can no longer claim spousal benefits unless your later marriage also ends (see ssa.gov for more information). Consult your advisor to help you do the math so that you can maximize your household retirement benefits.

Do you want or need a prenup?
Even if you collectively decide to exclude your new spouse from inheriting, most states give spouses the right to one-third to one-half of your estate. This “elective share” is a given, unless you stipulate otherwise in a valid, well-drafted prenuptial agreement. Prenups are becoming more common as people acknowledge the prevalence of divorce and the effect financial disagreements can have on a relationship. This legal contract supersedes local laws and details what you want to happen to your assets in the event of a death or divorce.

The agreement should include things like how you want to provide for the other spouse during and after the marriage and to what extent property and assets should be protected for future heirs. You may also want to use the agreement to stipulate just how much assistance will be offered to family members, say an adult child who wants to move in or elderly family members who may need round-the-clock care. The time to bring these matters up is well before you start wedding planning, so that both parties enter into a fair agreement without any undue pressure. Whatever you decide, just be sure that your will is consistent with the agreement, so there’s no confusion when the time comes.

For better or for worse
As you consider merging your lives together, for better or for worse, take into account that second marriages and blended families add complexity to your financial and retirement planning (even as they bring emotional richness to your life). The key is to balance the complicated issues that blended families face with careful planning. It’s important to work with your loved ones, financial advisor and attorney to establish ways to preserve assets in a way that makes sense for you and your family, whatever form it takes.



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