For a variety of reasons, second and third marriages with are becoming more prevalent in our society. As you and your future spouse consider merging your lives together, take into account that blended family issues can complicate your life and your financial well-being. The key is to balance these issues with careful planning. So, if you’re contemplating getting married again, there are a number of issues you need to consider prior to tying the knot!
You will need to establish your joint financial priorities. Consider how much each of you will contribute to various priorities given potential disparities in income and wealth. Start with taking inventory of your collective net worth. Identify and disclose all property, insurance coverage, bank accounts, and retirement/brokerage accounts. This disclosure should also include both parties’ liabilities. Discuss and understand how much debt you each have, your credit histories, and obligations to others, such as alimony or future college education expectations. Remember to establish a “rainy day” fund, but also consider setting aside some money for the fun things in life, too, like travel, concerts and dining out.
Existing alimony and child support responsibilities can be very stressful for remarried couples. Ideally, everyone will get along, and you and your ex will easily come to a fair agreement as to which family will pay for certain expenses. But it doesn’t always work that way. Obviously certain responsibilities will be mandated by decree, but invariably non-obligatory expenses will materialize. Decide now who will be responsible for this support. College expenses in a blended family is one of many financial planning issues that should be addressed prior to remarriage.
When it comes to retirement planning, there are a number of factors to consider. Did the ex-spouse claim half of the retirement assets in the divorce? Social Security benefits may also be affected. Social Security rules allow ex-spouses to collect benefits on their previous spouses’ records under certain circumstances if they have not remarried. (refer to https://www.ssa.gov for more information)
Remarriage should trigger a review of your estate planning documents. It’s an opportunity for each of you to review your wills, trust documents and beneficiaries listed on everything from your retirement & financial accounts, insurance policies and annuities. You may also need to determine how your various properties will be titled.
Prenuptial agreements are becoming more common as people acknowledge the prevalence of divorce. A prenuptial agreement designates the property and financial rights of each spouse if and when the marriage ends. In many cases it would be prudent to consider establishing a prenuptial agreement prior to marriage in order to protect existing wealth, expected future earnings, or a family business. Prenuptial agreements may also have an impact on estate planning by altering the division of property upon the death of a spouse.
Planning a second wedding is a blissful time. But life sometimes interrupts the promise of a long and happy marriage. These stressful realities can be mitigated without jeopardizing your financial future by planning for these inevitabilities prior to saying “I do.”
Le Keough, CFA, CPA, CFP®
Raymond James & Associates
2801 Via Fortuna, Suite 650
Austin, Texas 78746
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