Money is the cause of many divorces in our society. Those who end up getting remarried will naturally be apprehensive with their money and want to protect it. With that in mind, I will be sharing 4 tips for managing money in your second marriage so that you can be better prepared.
TIP #1: DETERMINE WHETHER TO COMBINE YOUR FINANCES
We’ve seen this go either way. Some re-married couples prefer to keep their money and assets separate. While others tend to combine everything.
You may be thinking that I’m referring to pre- or post-nuptial agreements, but I’m not. Instead, I’m referring to how you handle your day to day finances and your retirement planning.
Will you each maintain separate checking accounts and be responsible for paying for certain bills? Or will you have a joint checking account from which all bills are paid?
What about your retirement planning? Will you each plan for your own separate retirement using your own assets? Or will you you combine your assets together for future planning purposes?
These are very important questions to ask if you’re looking to get married again or even if you’ve already re-married.
TIP #2: CONSIDER A PRE- OR POST-NUPTIAL AGREEMENT
A pre- or post-nuptial agreement is essentially taking Tip #1 to the next level. It’s a way to legally protect your assets from your spouse.
If you have a smaller net worth then you may decide to NOT enter into a nuptial agreement since you don’t have much to risk.
However, if you have accumulated a sizable amount of assets then you may be very hesitant to combine your assets with your new spouse for fear of the marriage not working out. After all, you are likely thinking that you need to “learn from your past mistakes”.
You will not only need to think about how you want to handle this personally, but you will also want to talk this over with your spouse to set expectations.
TIP #3: UPDATE BENEFICIARIES AND ACCOUNT TITLES
There is an article titled Pension Pickle written by Zach Haberman and published in the New York Post back in 2005. The article discusses how a widower was disinherited from receiving his deceased wife’s $1.0 million pension.
Prior to the marriage, the wife had listed her sister as beneficiary and this was never updated when she was later married. So, when the wife unexpectedly died of a heart attack, the husband never received the pension he was so desperately counting on.
The moral of the story is to make sure that you update all beneficiaries and account titles anytime there is a life changing circumstance such as a divorce or a remarriage. This includes any bank accounts, investment accounts, 401(k)s, IRAs, life insurance policies, vehicles, house, etc…
If this is not done, then you could unintentionally disinherit a spouse or even your own children.
TIP #4: REVIEW WILLS AND TRUSTS
Tying in with Tip #3 is the idea that you need to review your Wills, Trusts, and all other estate planning documentation whenever you go through a divorce or are remarried.
Do you need to change the beneficiaries in your Will or Trust? If your former spouse is listed in various capacities then you will likely need to amend the documents to correct this. Do you wish to benefit your new spouse in some way?
What about your healthcare and financial powers of attorney? Are these still sufficient or do they also need to be amended or re-done?
If you’ve gone through a divorce and haven’t reviewed your estate planning documents then now would be the time to do so.
If you can implement these 4 tips, then you’ll be well on your way to managing money effectively as well as protecting it in your second marriage. Additionally, you’ll have peace of mind knowing that you have properly planned and that your wishes will be carried out as you desire rather than being left to chance.
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Do you have any tips to share based on your divorce or remarriage? Please share any thoughts, comments, or questions below.
CERTIFIED FINANCIAL PLANNER™