Many Americans are in their second and third marriages. In fact, statistics from a 2012 book, The Remarriage Blueprint, suggest that nearly 40 percent of new marriages include at least one previously married spouse. Remarrying later in life can produce a number of complex financial, legal, and emotional matters that should be addressed as soon as possible. If you or someone you love is part of a blended family, I urge you to think about these important issues.
Be candid about your financial situation. Couples who are remarrying frequently have significant financial baggage. Being open and honest with each other about assets, debts, and obligations from a previous marriage can help avoid problems later on.
Consider the following questions:
- What financial obligations are you bringing to the marriage?
- How will you split living expenses and contribute to savings?
- Do you plan to pool your finances?
- Where will you live and who will own the house?
- Who is on the mortgage?
- How will your marriage affect college financial aid for your children?
- What will you do if you need to financially support an adult child or elderly parent?
It's very important to be able to have these conversations early and often in your marriage. If you find that you're not on the same page or are worried about bringing up complicated issues, ask your financial representative to help mediate your discussion and provide a neutral perspective.
Update life insurance, medical directives, and beneficiary designations. It's unbelievably common for couples to forget to update important documents when they remarry. If you or your spouse dies without changing beneficiaries on a retirement account or life insurance policy, a significant part of the estate could go directly to a previous spouse, with no legal recourse. If you and your spouse have living wills, healthcare powers of attorney, or medical directives (and you should), review them with your attorney to make sure that these documents reflect your current wishes. If you don't currently have an attorney, I can introduce you to one from my professional network.
Think about how remarriage affects your retirement planning. Some divorce settlements require retirement benefits to be split with an ex-spouse, which could reduce your income in retirement. In the event of your death, your current spouse might have to split survivor benefits with your ex-partner. Social Security benefits can also be affected. For example, if you are entitled to spousal or survivor's Social Security benefits from a previous marriage, getting remarried might affect how much you are entitled to collect. Discuss these issues with your spouse and financial representative to make sure that your retirement takes into consideration your change in financial circumstances.
Consider drafting a prenuptial (or postnuptial) agreement. While most Americans get married without a prenup, I believe that they are essential in a remarriage situation. In many cases, one or both spouses will have children from a previous marriage or have significant debts and assets. When developed by an experienced attorney, a financial agreement can help you protect yourselves and your heirs from the financial fallout of a divorce.
Discuss estate planning with your investment representative and attorney. Estate planning can be emotionally and logistically complex in blended families, and it's important to make sure that you and your spouse update your estate plans. It's essential to discuss your estate plans if you want to make sure your children inherit rather than your current spouse or your spouse's children.
Remarrying later in life is wonderful, but a new marriage can introduce many complex financial considerations. I strongly recommend discussing these issues with your spouse as early as possible to ensure that your financial health is protected and to help lay the groundwork for future conversations about money.
It's also a good idea to speak with your investment executive and attorney so that they can help you understand how your finances and legal situation will be affected by your marriage. If you have any questions about marital finances or any other issues surrounding blended families, please give me a call. I'm always happy to be a resource to you and those you love.