Five Financial Tips for Your Second Marriage
When You Get Remarried, the Financial Stakes Are Often Higher| By: Randall E. White, CFP®, RICP®, CRPC®, CMFC®
Although American divorce rates have been falling slightly over the past few years, researchers still estimate that 41% of first marriages will end in divorce. This means that many people will get married more than once during their lifetimes. And while getting remarried offers a fresh start in many ways, it can be significantly more complex from a financial perspective.
Before you walk down the aisle for the second time, consider taking the important financial steps below.
1. Communicate Openly and Honestly
There are multiple ways to merge (or not merge) your finances in a relationship, and there is no right or wrong method. What’s important is that both spouses lay everything out on the table and ensure they’re on the same page about what household finances look like going forward. Taking the time to get everything out in the open at the beginning of the relationship is a great way to avoid long-term issues down the road, but it’s a valuable conversation at any time – especially if you’re about to get married. Second marriages often mean both spouses have more complex financial responsibilities, like child support, liquid and illiquid investment assets, and their personal estate-planning, retirement-planning, and tax-planning strategies.
It may feel overwhelming to have a comprehensive financial conversation but it’s the perfect opportunity to set financial expectations with regard to how you plan to manage your money as a couple. Take this time to discuss the big questions, such as whether you prefer to tackle all expenses jointly or keep some things separate. Discuss what you each want your retirement to look like and how close are you to hitting retirement savings goals. Learn how you both feel about investment risk tolerance, too. These topics may feel awkward or intrusive, but it’s important to begin having honest, productive money conversations. Oftentimes, you’ll find that you and your future spouse will learn a lot about one another’s money values through these conversations, too.
SEE ALSO: Preparing Your Finances for Divorce
2. Be Thoughtful About a Pre or Postnuptial Agreement
Some people feel that talking about prenuptial and postnuptial agreements is like admitting you don’t expect your marriage to last. While it’s true that it can be incredibly valuable for both parties in the event you find yourself needing to divorce in the future, it’s also smart planning for complex financial matters when one spouse dies. In the case of a second marriage, having a pre or postnuptial agreement is particularly important because it’s the only way to legally claim specific assets within the marriage.
You’re at a later point in your life when you marry for the second time, so chances are higher that you’re both bringing a lot more to the table in terms of assets. This can also mean more paperwork, but putting it off or ignoring it simply because it’s tiresome or uncomfortable could end up being a significant risk. Additionally, if you’re coming into the marriage with children, having a pre or postnuptial agreement in place will ensure that your children will be financially protected, whatever the future brings.
3. Factor in Your Children
Speaking of children, many people entering a second marriage are already parents. It’s important to have an honest conversation about what that means for you and your new spouse financially. It’s rare for a couple to be able to claim true equity when bringing children into the mix, and with education and childcare costs constantly on the rise, knowing where you each stand is crucial.
Work together to determine what expectations you each have in terms of how you plan to cover major child-related expenses such as healthcare, childcare, and tuition. These decisions are very personal and will vary from couple to couple because only you and your spouse can determine what is best for your family. Make an effort to be open, honest, and an active listener as you each discuss any concerns, hopes, or preferences. Conversations involving children can be emotionally charged, so take a break and revisit a topic later if needed.
Once you’ve decided on the best route forward for your unique blended family situation, consider discussing your plan of action with a financial advisor. This is a valuable step because a professional can help you ensure you’re considering all the potential options, as well as taking into account how your plans may affect any previously established retirement or financial strategies.
4. Update Your Estate Plan and Any Account Beneficiaries
Updating any existing estate planning or asset beneficiary documents is an important step before any marriage, but many people forget to re-assess their will and beneficiaries the second time around. It is vital that you don’t neglect this step because if you fail to do so and pass away, your spouse will have more control over how your estate is handled and what goes to your children. It’s also possible that your ex-spouse will receive assets you did not intend. A good practice for everyone, especially those who have divorced or have children, is to update any and all insurance or retirement savings accounts where you must name a beneficiary. This is also an ideal time to have frank discussions with your spouse about your preferences for asset allocation.
None of us like talking about our own mortality, or about how to divide up assets for heirs. However, doing so on a proactive basis will help eliminate future ambiguity or animosity for your loved ones. No one can see the future, so having a plan in place will provide peace of mind. It’s easy to forget who was named on an old IRA or insurance policy and, even if you name a different person in your will, the original policy beneficiary tends to hold up in court. So, before getting remarried or merging any accounts, take the time together to go over all accounts and assets, change any designated beneficiaries and update your wills. You may also consider purchasing additional life insurance with your spouse to bridge any asset or income disparities. It will provide not only peace of mind but will bring you and your new spouse closer together.
5. Don’t Make Money Matters a One-Time Conversation
The basis of any healthy relationship is communication, and money matters are an important part of that. Regardless of the assets – or financial baggage – you and your new spouse are bringing into your second marriage, keeping your lines of communication open is key. It can be difficult to have financial conversations because we’re predisposed to avoid having those hard talks about money. However, if you’re not proactive then you’ll most likely be forced to have these discussions at the worst times (like an unexpected death or divorce), so the more you can get everything out in the open and agreed upon upfront, the stronger your relationship will be moving forward.
Are You Planning a Second Marriage?
If you’re on your way to walking down the aisle a second time – congratulations! However, if you’re also feeling overwhelmed about where to begin merging your financial lives, or if your finances are particularly complex, consider speaking with one of our qualified financial advisors. At TriCapital, we help our clients plan for a confident financial future through every phase of life. Reach out today to schedule a complimentary discovery call to learn more about our comprehensive services.
Securities offered through Triad Advisors, LLC, member FINRA/SPIC. Advisory services offered through TriCapital Wealth Management, Inc. TriCapital Wealth Management, Inc. is not affiliated with Triad Advisors, LLC.