Planning for Remarriage

If you are thinking of marrying again…

For those courageous enough to remarry, there are many financial questions to answer together. How will you combine finances? This issue gets thornier the older you are. You’ll want to create a financial strategy that considers the assets, liabilities, and financial responsibilities that each partner brings to the marriage. Financial planning for remarriage is more complicated than it was the first time you got married, because your life likely isn’t as simple now. You may have acquired more assets. You may have children. You may want to plan more carefully this time, now that you’re familiar with the financial consequences of divorce or the death of a spouse. You may be more focused on retirement than you were the first time.

Many of the basic issues are no different than for those marrying for the first time: budgeting, savings and investments, insurance and risk, tax planning, integrating your employee and retirement benefits, and property ownership.

Ensure a healthy future financial relationship

Before getting married, have an honest talk about your finances

You and your partner should discuss how you will handle money together, well before the wedding. Differences in how you and your partner handle and think about money can hurt the process unless you can communicate those differences. One person may be a saver, the other a spender. Also, you may have different financial goals than your partner. Money issues can be especially troublesome when you remarry, because you may feel financially vulnerable if a previous marriage ended in divorce, particularly if it ended, all or in part, because of financial troubles.

You can together work out the terms of your financial relationship, setting up a mutually agreeable plan. Before marriage is the time to decide if you want to keep separate bank accounts and to decide whether you want to pay expenses together or separately. Consider disclosing all your obligations and income to your partner to avoid any misunderstandings in the future and so that you can make sure that any budget you set is realistic.

Consider using legal agreements

Prenuptial and postnuptial agreements are contracts used by couples of all ages to define their rights, duties, and obligations during marriage and to determine what happens in the event the couple separates or divorces or one partner dies. If the contract is written prior to the marriage, it’s called a prenuptial, premarital, or antemarital agreement. (If it’s written during the marriage, then it’s called a postmarital agreement.) 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 trauma that could occur if their marriage ends. They can spell out what assets and liabilities each partner is bringing into the marriage and determine how the assets brought into the marriage, and those acquired during the marriage, will be divided. These issues may also have an impact on your estate planning.

Consider keeping credit separate

One way to help you and your future spouse maintain a good financial relationship is to continue keeping your credit separate even after you marry. Instead of applying for joint credit cards, each partner can keep his or her own credit cards. This can protect you in several ways. If one of you has good credit but the other doesn’t, it can help the partner with good credit keep it. Keeping credit separate will also make it likely that if this marriage ends in divorce, only the person who incurred the obligation will have to pay it. In short, you won’t end up paying your ex-spouse’s debts. If you or your partner have been burned financially in a relationship before, keeping separate credit might make you feel more at ease and may prevent arguments.

The downside to keeping separate credit is that it can be complicated. If one spouse is working while another isn’t, the nonworking spouse may have trouble qualifying for his or her own credit. Trust issues and arguments over credit may also arise should one spouse have more credit or more accounts than another. In addition, you and your spouse may be able to qualify for a credit card or a loan much more easily if you apply together rather than separately, so keeping your credit completely separate may not be smart or even feasible.

Who owns what

There are several ways ownership of assets can be titled. Couples who are remarrying should pay close attention to the way assets acquired after they marry are titled, because how their assets are owned may affect their current finances as well as determine who will receive the assets after they die.

For example, if you and your partner buy a car and sign the loan paperwork together, you own the car jointly (as joint tenants). Owning your car this way can be advantageous because it means that if one of you dies, ownership of the car will pass immediately to the other. However, joint ownership can also have certain disadvantages. For example, if your partner owes back child support, his or her ex-spouse may be able to claim that the car should be sold and the money used to pay back child support, and the court may order this. Or, if your spouse owes money to a creditor, the creditor may be able to place a lien on the property or force you to sell it to pay off the debt. The fact that you aren’t responsible for the debt won’t affect the creditor’s right to your spouse’s share of the property.

People remarrying should carefully consider how holding assets can affect their estate planning goals. For example, if you have children from a previous marriage and you want to make sure they receive your assets when you die, consider setting up a trust for the benefit of the children. To make sure that your spouse has access to funds immediately after you die, you may want to set up a joint savings account.

Protecting retirement and pension benefits

Older individuals sometimes hesitate to remarry because they fear losing their Social Security or pension benefits. However, except under certain circumstances, this is usually not the case. For example, if you’re receiving a survivor’s benefit or annuity based on your deceased spouse’s pension, you generally won’t lose it if you remarry. One exception that can occur: If you are receiving survivor’s benefits based on your deceased spouse’s service with the federal government or the military, you do face the likelihood of losing your benefits in that situation if you remarry before age 55.

Rules governing Social Security survivor’s benefits are a little different. If you are over age 60 and are receiving survivor’s benefits based on your deceased spouse’s Social Security record, you won’t lose those benefits if you remarry. However, if you’re under age 60 and are receiving benefits because you are caring for a dependent child, you will lose your survivor’s benefits if you remarry.

Blue Spark Capital Advisors

We're a boutique fee-only Registered Investment Advisory (RIA) and financial planning firm based in New York City and the Berkshires.

We provide planning and investment management services and financial coaching to women, men and their families.

We believe in a holistic approach. Movement in each piece of your financial plan impacts the others, so we consider your entire picture.

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