What a Second Marriage Could Cost You
4 financial considerations before saying 'I do' again
(This article previously appeared on MarketWatch.com.)
Second marriages are financially complicated. From inheriting a new set of kids to understanding what assets a spouse is bringing to the table, prior to walking down the aisle, partners should discuss a range of uncomfortable financial issues that could potentially ruin a relationship down the road if not addressed immediately.
In addition to talking to a financial adviser before walking down the aisle again, here are four that should be considered when remarrying:
1. What you bring with you Unlike the first time, second marriages don’t involve the joining of two people starting their lives together. They can bring together two full lives with retirement approaching, children and one last thing — an ex-spouse. Couples who marry for a second time are often older.
In fact, many older individuals hesitate to remarry because they fear losing their Social Security or pension benefits. However, except under certain circumstances, that usually won't happen. For example, if a person is receiving a survivor’s benefit or annuity based on a deceased spouse’s pension, he or she generally won’t lose it when remarrying.
Individuals looking to remarry also need to consider expenses related to child support and custody, which can also include spousal support. Prior to a new marriage, you should review your will, insurance policies and pension plan. Newly married couples may want to change their beneficiary designations, although this may not always be possible.
2. Assets before and after Priorto getting married again, assets should be looked at very closely. There are several ways ownership of assets can be designated.
Couples who are remarrying should pay close attention to the way assets acquired after the marriage are titled, because the way they are owned may affect current finances as well as determine who will receive the assets after death.
Individuals remarrying should carefully consider how holding assets could affect estate-planning goals. For example, if a person has children from a previous marriage and wants to make sure they'll receive their assets when they die, it might be wise to set up a trust for the benefit of the children. To make sure that the new spouse has access to funds immediately after the other dies, a spouse may want to set up a joint savings account.
3. Debt and credit history After a divorce, it is not uncommon to have extensive debt and a less-than-spotless credit history. Couples who are about to begin second marriages should be honest with each other and disclose debts each owe. Although some couples may be surprised to find out past financial problems, it’s better to disclose this.
To keep a good financial relationship, instead of applying for joint credit cards, each partner should keep his or her own cards. Being upfront with past slipups can protect a couple individually in several ways. The most important is when one spouse has good credit but the other doesn’t — it can help the partner with good credit keep it.
4. Protecting the future Finally, the most important decision before a couple remarries is deciding if a prenuptial or postnuptial agreement is appropriate. Couples who are remarrying should consider using marital agreements if they have substantial assets or children to protect and/or want to avoid some of the financial problems that could occur if their marriage ends.
These types of agreements are a sticky topic for some couples, but they are important and may have a significant impact on your estate planning.
Michael Smith is general partner and president of STA Wealth Management.