Five Financial Tips for Your Second Marriage
The financial stakes can be higher for a second marriage, so you’ll want to be prepared.
It’s no secret that about half of first marriages end in divorce, meaning many people will get married more than once during their lifetimes. If you find yourself getting ready for your second marriage, congratulations! Getting remarried offers a fresh start, a new opportunity to learn from the past, and time to build a life with someone new.
Before you walk down the aisle for the second time, however, there are several important financial steps you should take with your partner. Communication is always important in a relationship, but in some ways, it’s even more important in a second marriage because you will both be bringing more complexity and baggage with you – some of it financial.
Below are five steps you should consider before saying “I Do” for the second time.
1. Lay it all out on the table.
Every couple has their own way of combining finances in marriage. What’s important, however, is being sure that everything is out in the open and you’re both on the same page. Often, couples don’t even think to look at their combined net worth until they find themselves discussing who is going to pay for what in their wedding or how they plan on financing a home purchase or other large expense.
Taking the time to lay everything out in the open and put all your cards on the table at the beginning of the relationship is a great way to avoid long-term issues down the road. This is especially true for couples who marry again and have more complex financial responsibilities such as child support, liquid and illiquid investment assets, and their personal estate-planning, retirement-planning, and tax-planning strategies.
This conversation is also the perfect opportunity to set financial expectations with regard to how you plan to manage your money as a couple. Take this time to discuss the big questions, such as whether you prefer to tackle all expenses jointly or keep some things separate. Discuss what you each want your retirements to look like and how close are you to hitting retirement savings goals. Learn how you both feel about investment risk tolerance, too. These topics may feel awkward or intrusive, but it’s important to begin having honest, productive money conversations. Oftentimes, you’ll find that you and your future spouse will learn a lot about one another’s money values through these conversations, too.
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2. Determine whether you want a pre or postnuptial agreement.
While having conversations about pre and postnuptial agreements can feel disconcerting in the moment, they can be incredibly valuable for both parties in the event you find yourself needing to divorce in the future. In the case of a second marriage, having a pre or postnuptial agreement is particularly important because it’s the only way to legally claim specific assets within the marriage.
Since you’re at a later point in your life when you marry for the second time, chances are you are both bringing a lot more to the table in terms of assets, meaning that avoiding paperwork simply because it’s uncomfortable could end up being a significant risk. Additionally, if you’re coming into the marriage with children, having a prenuptial agreement in place will help ensure that your children will be financially protected in the event of divorce or if one spouse dies.
3. Take the time to decide how children factor in.
Coming into a second marriage, it’s common to have children. It’s important to have an honest conversation about what that means for you and your new spouse financially. It’s rare for a couple to be able to claim true equity when bringing children into the mix, and with education and childcare costs constantly on the rise, knowing where you each stand is crucial.
Sit down with your future spouse and determine what expectations you each have in terms of how you plan to cover major child-related expenses such as healthcare, childcare, and tuition. These decisions are very personal and will vary from couple to couple because only you and your spouse can determine what is best for your family. Make an effort to be open, honest, and receptive as you each discuss any concerns, hopes, or preferences throughout the discussion. Once you’ve decided on the best route forward for your unique familial situation, discuss your plan of action with a financial advisor to ensure that you’re considering all the potential options, as well as taking into account how these plans may affect your already established retirement and long-term financial goals.
SEE ALSO: Family and Finances: Tips for Discussing Money and Retirement with Your Loved Ones
4. Update any wills, estates, and beneficiaries.
It is important to complete this step before any marriage, but many people forget to re-assess their will and beneficiaries the second time around. It is vital that you don’t neglect this step because if you fail to do so and pass away, your spouse will have more control over how your estate is handled and what goes to your children. A good practice for everyone, especially those who have divorced or have children, is to update any and all insurance or retirement savings accounts where you must name a beneficiary. It is also important to have frank discussions with your spouse detailing both of your wishes as to how assets should be allocated.
Nobody likes talking about death, or about how to divide up money for heirs, but doing so on a proactive basis will help eliminate future ambiguity or animosity for your loved ones. No one can see the future, so having a plan in place will provide peace of mind. It’s easy to forget who was named on an old IRA or insurance policy and, even if you name a different person in your will, the original policy tends to hold up in court. So, before getting remarried or merging any accounts, take the time together to go over all accounts and assets, change over any designated beneficiaries and update your wills. You may also consider purchasing additional life insurance with your spouse to bridge any asset or income disparities. It will provide not only peace of mind but may bring you and your new spouse closer together.
5. Most importantly, practice open communication.
Ultimately, no matter what sort of assets – or financial baggage – you and your new spouse are bringing into your marriage, keeping your lines of communication open is key. It can be difficult to have financial conversations because we’re predisposed to avoid having those hard talks about money. However, if you’re not proactive then you’ll most likely be forced to have these discussions at the worst times (like an unexpected death or divorce), so the more you can get everything out in the open and agreed upon upfront, the stronger your relationship will be moving forward.
If you’re feeling overwhelmed about where to begin, or if your finances are particularly complex, consider speaking with a qualified financial advisor. They can ensure you’re considering all the available options and help you create a financial plan that works for the entire family. The main goal is that you and your spouse are moving forward, together, prepared to tackle this next exciting part of your lives with your eyes and heart wide open.
At Peak Financial Freedom Group, our number one priority is to help you stop worrying about your money. Contact us today to learn more about our services.
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