Are you planning to remarry? If so,you might consider saying "I do"in front of a financial planner aswell as the minister. That's becausefinances in remarriages are typicallythornier and more complex than the firsttime around. Both of you may bring minoror adult children to the second marriage,have far more in accumulated assets ordebts, and have more entrenched personalmoney styles. In addition, you may becarrying emotional debris from financialconflicts in your previous marriage.
Here are a few useful tips to make thechallenge of melding two sets of personalfinances smoother:
• Talk it over. Lay out your financesbefore each other. Review what assetseach of you bring and what you mightkeep separate. Who will pay what portionof daily living expenses or big-ticketitems? This can be a sticky issue if oneperson has significantly more income orassets than the other.
What financial obligations do youbring from your previous marriage? Areyou committed to putting a child throughcollege or helping support adult childrenin some way? Will you alone pay for that,or will both of you? What impact mightremarriage have on financial aid for achild in college? Do either of you havechild-support obligations? Will minor childrenbe living with you?
• Write everything out. Minimizelater questions or disputes by writingeverything out from the outset. Wherewill you live? Remarriages often involvetwo homes. Will you sell one home andmove into the other residence, or sellboth homes and move into a third?Either way, what if each of you has children?Who will inherit the home afterboth of you die?
• Update wills and beneficiary designations.Financial planners are amazed athow often remarried couples forget toupdate wills and beneficiary designationsfor such financial instruments as individualretirement accounts, pension accounts,and life insurance policies. If youdie and your former spouse is listed as thebeneficiary on your accounts, that's whoinherits, not your current spouse.
• Review retirement benefits. Beyondupdating retirement account beneficiaries,you may have other retirement issuesto consider. For example, a former spousemight be entitled from the divorce decreeto a portion of your retirement benefits,which would reduce retirement resourcesfor you and your spouse.
Remarriage can reduce Social Securitybenefits. Be aware that the rules are verycomplex. For example, should you remarrybefore you're age 60, you may loseSocial Security benefits you were previouslyentitled to based on your formerspouse's work earnings.
• Review all insurances. You mayneed additional life insurance as currentincome protection, or perhaps to compensatechildren from your previous marriage,because, upon remarriage, you soldtheir childhood home that they otherwisewould have inherited. Health care, auto,disability, and other insurance policies alsomay need adjusting.
• Consider trusts. Trusts can be especiallyimportant in remarriages becauseyou can use them to direct assets todesired heirs while still supporting yournew spouse. For example, say you bringto the remarriage a home or stocks thatyou eventually want to give to the childrenfrom your previous marriage. Youcan set up a trust that allows your currentspouse to live in the home or drawincome from the stocks until they die.The trust then passes on the home orstocks to your children. Without thetrust, the home and stocks could end upin other hands, such as the children fromyour spouse's previous marriage.
• Consider a prenuptial agreement.While disdained as unromantic, a prenuptialagreement is often essential in remarriages.It's particularly important whenone or both parties bring substantialassets or debts to the marriage, or whenone or both expect to receive substantialassets (eg, inheritance from parents).Another common situation is when a businessowner wants to pass the business totheir children and not their spouse.
Prenuptials are strong documents, aslong as you draw them up with separateattorneys well in advance of the union—no springing the prenuptial the nightbefore the wedding—and you've providedfull disclosure of your finances. Updatethe prenuptial agreement if your financialcircumstances change significantly.
These tips are only a starting point.Remarriage is a time to review all aspectsof your finances, including starting orrevamping your spending plan (ie, budget),possibly readjusting your investmentportfolios, and reviewing youremployee benefits.
This article has been produced by the Financial
Planning Association (www.fpanet.org), which is
the membership organization for the financial