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Business // Thinking Smart
David S. Chang

Second Marriage A Financial Challenge

According to a recent study, nearly 40 percent of new marriages include at least one previously married spouse. There are many complex financial, legal and emotional matters that may arise when remarrying later in life that should be addressed as soon as possible. Here are some important issues to consider to help protect your finances. It’s very important to have these conversations early and often in your marriage. If you need help, ask your financial representative to help mediate your discussion and provide a neutral perspective.

* Be honest and transparent about your financial situation. Many couples who are remarrying may bring significant financial baggage into the relationship. Be candid with each other about assets, debts, and obligations from a previous marriage, and don’t try to hide things. It may help avoid problems later on. Consider the following questions:

What financial debts and obligations are you bringing to the marriage?

How will you split living expenses and contribute to savings and investments?

Do you plan to pool your finances?

Will you keep separate financial accounts or jointly hold them?

Where will you live and who will own the house?

Who is on the mortgage? How will your marriage affect college financial aid and support for your children?

What will you do if you need to financially support an adult child or elderly parent?

* Update your legal paperwork and life insurance, medical directives and beneficiary designations. It’s 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, review them with your attorney to make sure that these documents reflect your current wishes. Updating these documents should be done regardless!

* Review your retirement plan. 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 also can 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 can collect. Discuss these issues with your spouse and financial representative to make sure that you take these potential changes into account in your retirement plan.

* Prenuptial or postnuptial agreement: While most Americans get married without a prenup, some may be 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 protect yourselves and your heirs from the financial fallout of a divorce.

* Review your estate plan. Estate planning can be emotionally and logistically complex in blended families. 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.

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