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Whether this is the first marriage for one of you, or both of you are veteran marrieds, it's likely that each of you is entering your new partnership with assets much greater in value than toasters and vacuums.
Many couples find it helpful to create pre-nuptial agreements (PNAs) to legally sort out the issues listed below:
- Have significantly more assets than your new spouse
- Have children
- Own or expect to inherit a business
It can help ensure that what you bring to the marriage stays in your family in the event of a divorce or of your death.
When it comes to another trip down the aisle, you both should be forthcoming about the:
Full disclosure of credit histories and ongoing debt. Be open about credit card debt. Disclose credit judgments or bankruptcies. Be honest about what you owe on mortgages or for parental care or medical bills. Sometimes, marriage can make you a co-debtor.
Extent of total assets. Itemize real estate, incomes, pensions, savings, cars, collectibles, business interests, investment portfolios, life insurance policies, etc. If you live in a community property state, you may want to title specific assets in your name or jointly with your child, not with your new spouse. Your attorney can advise you on the best path here.
Financial support of the marriage. Determine whether you will keep separate bank accounts or create joint accounts. You could choose to contribute to a joint account for combined expenses and retain a separate account for individual discretionary or obligatory expenses.
Obligations from previous unions. Discuss your alimony or child support payments and when they end. Consider the following:
- Do you have preexisting business debts that you incurred with a former spouse?
- Are either of you required to provide insurance coverage for an ex-spouse?
- Does a previous spouse have legal claim to your employer-sponsored retirement plan savings?
- If you receive assets from a former spouse, will remarrying stop the receipt of a particular inheritance or discontinue financial consideration?
Property issues. Decide whose house becomes the marital home and what should be done about the other. Figure out who will own or live in the house if the owner dies, if the marriage ends, or if a widowed spouse remarries. Decide whether or not the nonowner spouse should be put on the deed or compensated for contributing to the mortgage or home improvements.
If you want to leave the house to children, remove the home from consideration as a joint marital asset. But beware that, despite the best preventative measures, you still risk losing the home—all it takes is a judge or an aggressive divorce attorney.
Supporting children. Second marriages often involve blended families or the creation of a new family. You should establish how much financial support each child will receive for nonobligatory expenses not mandated by a court. Decide whether the child's biological parent will be responsible for this support, whether it will be a joint expense, or whether it will come from the proceeds of past marriages and/or from future marital assets.
Be aware that federal financial aid forms require that a stepparent's income be listed. Even if the stepparent has no legal obligation to contribute to the child's education, his or her income will likely affect the amount of financial aid the child receives from the government.
Letting your children know up front that you've made provisions to protect their inheritance may also make them more supportive of your new union, especially if it has created a stepfamily or half-siblings. Similarly, specifically naming your stepchildren in your will as beneficiaries is essential as they may not automatically inherit from your estate.
Estate planning. Remarriage is an excellent opportunity to review your will and the beneficiaries of your assets. Many former spouses have inherited life insurance policies that were not part of a divorce settlement!
Keep in mind that the laws in some states may entitle your spouse to a portion of your estate, even if your will or trust deems otherwise. If keeping assets “in the family” is mandatory, work with your financial advisor and/or attorney to establish trusts that preserve assets in the way in which you intend.
Seek professional guidance, if needed
While your marriage is your commitment to support and rely on each other above everyone else, seeking professional financial help neither undermines this bond nor pre-destines it to failure. If certain issues seem contentious, you may benefit from engaging an outside professional to help navigate them.
© Copyright 2008 Commonwealth Financial Network
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