You may want to consider some financial issues before walking down the aisle again.
When it comes to tackling those financial issues around remarriage, financial advisors recommend couples look at the past — for example, how each person handled finances, and their pre-marital liabilities and assets — the present (e.g., new benefit options) and the future — how, for instance, they’ll handle finances as a unit or protect themselves and loved ones in case of death or divorce.
Ghosts of finances past
It’s important to “get out all the financial skeletons in the closet,” said certified financial planner Rick Kahler, founder of Kahler Financial Group in Rapid City, South Dakota.
Working with a financial therapist can help future spouses disclose all debts and income, to prevent financial infidelity down the road. It will also give them an opportunity to talk about any ingrained money attitudes that influence their individual financial behaviors and attitudes, Kahler said.
It’s essential that blended families have similar talks with their children, too, according to Stacy Francis, CFP, president and CEO of Francis Financial in New York.
“The kids were probably raised in different financial circumstances, so it’s important to talk as a family about new financial expectations,” she said.
The financial here and now
Once prospective spouses identify their collective financial situation, there are a few topics to consider, according to Douglas Kobak, CFP and principal at Main Line Group Wealth Management in Conshohocken, Pennsylvania.
For example, if you were previously married for more than 10 years and collecting Social Security benefits on your ex-spouse’s account, you may lose those payments if you remarry. Also, your new combined income may result in a higher tax bill, often called a “marriage penalty.”
After you remarry, pay attention to the impact on benefits, Kobak said. He noted that, as marriage is a recognized life event, you may be allowed to change your insurance options outside the regular autumn time window.
“Be aware that if you were previously divorced and getting substantially discounted insurance via the [Healthcare.gov] exchange, when you remarry, your insurance costs may go up if your joint income goes up,” he said.
It’s wise to think about protecting pre-marital assets that were in your name only, Kobak said.
“You should consult an estate attorney in your state prior to marriage,” he said. “They may advise against commingling some or all assets, and suggest a trust, segregating pre-marital assets from marital assets, to protect you in the event of divorce.”
Francis at Francis Financial said estate planning is “key” if you have a new family with children. “It’s a love letter to your children, previous or new,” she said. “They are documents to take care of every person you love.
“It’s important to update all your beneficiaries, too,” Francis added.
In addition, be sure to check Transfer on Death designations on checking accounts, brokerage accounts and real estate deeds, as these override designations in a will, Kahler said.
Then there’s the often dreaded pre-nup.
“A pre-nuptial agreement is a step a lot of blended families skip, but it doesn’t have to be un-romantic,” Francis said. “What better time to discuss it than when you’re madly in love?
“If there’s a divorce, it protects everyone from extraordinarily high legal fees, when that money could go to your financial future,” she added.
Ongoing steps to take
“Financial communication is an essential best practice to achieve financial success in a relationship,” said Rob Wermuth, CFP and partner with Legacy Planning, based in West Chester, Pennsylvania.
He recommends couples have regular monthly meetings to discuss their finances in a structured way. The meetings should be from 60 to 90 minutes long, away from home and its distractions.
An agenda should be followed, he said, covering financial goals, spending (budget versus actual), target cash balances needed to pay bills, and assignment of tasks for the next meeting (e.g., call insurance agent, review investments, etc.)
Clients have been enthusiastic, Wermuth said. “They respond with more energy, more follow up, and more accountability to their advisor team,” he said, adding that remarried clients “want to be empowered to grow their relationship because, in their previous marriages, money was one of the factors that drove them apart.”