Thinking of tying the knot again? According to Sinatra, love is easier the second time around, but his romantic lyrics gloss over the reality that second marriages can require more planning than first marriages. Although you’re older and (hopefully) wiser, the circumstances are generally quite different. Add finances and family to the mix and things can quickly become complicated.
Financial Issues
Your combined income, expenses, assets and liabilities should be revealed and discussed before the wedding bells ring. Can you and your partner agree on the answers to the following questions? If so, you’ll have a head start on your new marriage.
Household income and expenses.
Who will contribute to the household income and how much? Is that figure steady or variable month-to-month? What will your combined living expenses be? Will each partner contribute equally to these expenses? Use this information to craft a budget that both of you can support and adhere to.Housing.
Where will you live? If each of you owns a house, will one or both be sold? If you sell either house, will a capital gain be realized? If so, plan ahead. Think through the impact of the timing of the sale. Under the current residence sale rules, selling one or both houses before you are married may allow you to minimize or eliminate any tax consequences.Children.
What are the arrangements for any dependent children from previous marriages? Where will they live? How will expenses be shared with the other parent(s)? Is college funding an issue or is it likely to become an issue in the future?Money mentality.
Is it easy for you to talk about money issues with each other? Are you compatible savers? Will one or both of you be responsible for managing investments? Can you agree on future goals, i.e. retirement, second home, charitable giving?Assets.
How will assets brought to the marriage be handled? Will ownership titles remain the same or change? Will the beneficiary of life insurance and retirement plans be your new partner, your children from a previous marriage or a combination?Liabilities.
What are each partner’s outstanding debts? Are credit cards paid off each month? Does each partner have a good credit rating or have late payments become an issue?
Thorough discussions that allow you to come to an agreement on how to handle existing and future financial issues will go a long way toward avoiding future conflict.
Prenuptial Agreements and Estate Planning
Now’s the time to determine how you want your assets handled in the event of divorce or death. This is particularly important if either of you have children from previous marriages. A prenuptial agreement that anticipates lifetime circumstances and an estate plan with properly drafted provisions can assure your wishes are respected.
A prenuptial agreement establishes a contingency plan in the event of an unanticipated termination of the marriage and lists the individual assets of each partner. Usually the agreement specifies that listed assets remain the property of the original owner and therefore are not included in marital assets. However, these assets must remain in their original ownership form, i.e., the titles should not be changed to include the name of the new spouse or changed to “joint” property. If changed, the prenuptial agreement may no longer apply to that asset.
An estate plan indicates how your assets will be distributed after your death. Generally, each spouse will ultimately want children from the prior marriage to inherit the assets he/she brought to the marriage. A properly drafted estate plan can provide financial security for the surviving spouse during his/her lifetime while having the assets pass to the children of the previous marriage at the death of the surviving spouse. Ask your attorney about a Qualified Terminal Interest Property (QTIP) trust.
So plan your financial future together before the wedding and make the appropriate changes to your estate plan shortly after. The best wedding present you can give each other is peace of mind.