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Your Second Marriage Financial Guide

Apr 15, 2018 3 min read Ilana Polyak

Key Takeaways

  • Consider a prenup if you have children and/or significant assets.
  • Decide how you'll support children from previous marriages.
  • Consider life insurance as a source of funds for inheritance.

 

Who says love only strikes once? According to Pew Research Center, 40% of marriages include at least one partner who has already made a trip down the aisle. “Second marriages take a lot more juggling than the first," says Ginita Wall, a CPA and certified financial planner, and co-author of the book “ABCs of Divorce for Women," among others.

 

 

Retying the knot can bring a host of complications. In your second marriage, you are older and might have more assets (and perhaps more debts, too). What's more, you might still have financial dealings with your ex-spouse, Wall notes. And if children are in the picture, a second marriage is a balancing act between your financial responsibilities to them and your new life.

Though complicated, finances don't have to come between you and your next beloved.


To prenup or not to prenup?

No one enters marriage planning to divorce. But it happens. In fact, it happens more the second time around, with 60% of second marriages ending in divorce, compared to just 50% for first marriages, according to the U.S. Census. So it's wise to protect yourself.

A prenup helps keep some of your assets separate and spells out how you want others to be divided in the case of divorce — rather than deferring to the divorce laws of your state. It's especially important when spouses come to the marriage with unequal wealth.

Give serious thought to a prenup if:

  • You have children from a previous marriage
  • You are bringing significant assets into the marriage
  • You expect an inheritance in the future

Prenups come with some stigma, so approach the topic with your partner with honesty and kindness. Allow yourself plenty of time to think through the financial issues you want to address, and find lawyers to represent both your interests.


Separate and equal

"Going into a second marriage, you're probably used to managing money on your own after a period of singlehood. There's no need to give that up entirely," Wall says.

You may want to consider using a joint account for joint expenses — such as housing, food, insurance and utilities — while maintaining separate accounts for other expenses like debt and spousal support. Then decide how much of your earnings you'll contribute to the joint account and how much you'll keep separate.

“Couples will often continue to keep their savings and investments separate," Wall says.

Over time, you may decide to blend more of your finances, especially if your financial personalities mesh well.


Sweet children of ours

No matter their ages, children from a previous marriage require special consideration.

You must decide how much of your joint finances will be used for them. “This is where I see the most conflict," Wall says. “A spouse might say, 'He indulges his children while I have to scrimp and save.'"

The solution? Like everything else related to marriage, it's communication. Take a detailed look at how much is currently being spent on the children, both in the form of child support and extras such as piano lessons, sports equipment and camp.

For example, one spouse might be putting kids from a previous marriage through college, while his or her current spouse picks up the bulk of household expenses during this time. Spouses may not realize until much later that they've indirectly paid for a stepchild's college, which can breed resentment.

If your children are grown, they may be wary of your new union and worried that your new spouse might take advantage of you. They may fear you'll leave a new spouse the inheritance they believe is rightly theirs. You may need additional estate planning documents to ensure you protect both your spouse and your children.


Working toward a happier home

The simplest housing arrangement is a fresh start where you buy a home together. Of course, it doesn't always work out that way. A home may be in a great school district, or be the perfect commuting distance from work. It often makes the most sense for one spouse to move in with the other.

That can bring about its own conflict.

Will the other spouse contribute to the mortgage and upkeep of a home without the benefit of ownership? Will the home be retitled in both spouses' names, allowing the other spouse to build equity?

“That could make the kids really upset," notes Wall. “They may think this was their family home and suddenly the new spouse is on the title."

You may want to consider using life insurance to address some of these concerns. For example, your spouse could be the beneficiary of a life insurance policy. The proceeds from the death benefit could provide your spouse with the funds to purchase a new home in the event of your death. That way, you can then leave the home to your children if it has sentimental value to them.


Retire well

By the time you marry for the second time, you probably have some retirement savings. Retirement accounts require special attention.

Reviewing your beneficiaries should be the first step. You might have designated your ex-spouse years ago as the beneficiary for your IRA and neglected to change that. Should you die, your current spouse won't inherit the IRA. On the other hand, the terms of your divorce decree might obligate you to keep your ex-spouse as your beneficiary.

Work-based accounts are different. Current spouses are automatically assumed to be the beneficiary of 401(k)s and 403(b)s, unless they consent to another plan in writing. If you want to leave your retirement account to your children, for example, you'll need to take those extra steps. You should routinely check your beneficiaries to make sure they are up to date.

 

What you can do next

Before sending out the wedding invitations, have a financial meeting with your soon-to-be spouse to go over all your finances. Bring your bank, investment and retirement account statements, as well as any credit card bills and loan notes. Understand that this may be an uncomfortable conversation. But if the second time is to be the charm, it's a necessary one.

 

Ilana Polyak is a freelance writer who specializes in personal finance and the financial advisory industry. Her work has appeared in The New York Times, Barron's, Kiplinger's Personal Finance, Bloomberg BusinessWeek and CNBC.com.

 

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