For a variety of reasons, second (or third) marriages are becoming the norm. And even as they bring emotional richness to your life, blended families – with ex-spouses, step kids and half siblings – add complexity to financial and retirement planning. To help your marriage withstand some of the common pitfalls that trip up a relationship, it’s important to make time to talk about your new financial realities. Here are four questions to keep in mind.
What are Your Priorities?
Any marriage requires establishing joint financial priorities and setting the wheels in motion to try to achieve them. Start by taking inventory of your collective assets and liabilities, property, insurance coverage, banking, retirement and brokerage accounts – pretty much anything that has to do with money.
You’ll also need to discuss how much debt you each have, your credit histories, and what exactly you owe to other parties. What if alimony isn’t enough for an ex who constantly demands more? Or you use debt to buy lavish gifts for your children out of guilt after the divorce? Your spouse should know about those payments so you can work together on a plan to take care of your family without jeopardizing your financial future together.
It’s also a good idea to think about how much each of you should contribute if there are disparities in income and to what accounts (his, hers and ours, perhaps?), as well as how you’ll pay for your children’s needs and bills you incur as a family.
Who Gets What, When?
Getting married is one of those life events that should automatically trigger a review of your estate planning documents. It’s an opportunity for each of you to review your will, trust documents and beneficiaries on everything from your financial and retirement accounts to insurance and annuities. You’ll also need to determine how your property will be titled.
What About the Kids?
With second marriages often come blended families or the creation of a new one. 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. The court will mandate certain responsibilities, but invariably nonobligatory expenses will crop up. Decide now whether one of the biological parents will be responsible for this support, whether it’ll be a joint expense between the parents or whether you and your new spouse will pay and where the money will come from.
What About Retirement?
And as you consider your financial realities, don’t forget to take your future wants and needs into account. When it comes to retirement planning, there are a number of factors to consider. And some depend on the divorce decree from the earlier marriage. Did the ex-spouse claim half of the retirement assets in the divorce? If so, that means you may have less to retire on as a couple, and you’ll need to plan for that.
Step By Step:
- Consider a trust to protect the inheritance of children from prior marriages
- Discuss a pre- or postnuptial agreement
- Update wills and other beneficiary accounts
- Re-evaluate life insurance needs
- Coordinate healthcare and retirement benefits
Social Security benefits also come into play, particularly if you’re considering marriage later in life. Social Security rules allow exes and widows/widowers to collect benefits on their previous spouses’ records under certain circumstances. But remarriage generally means those spousal benefits will go away unless the later marriage also ends (see ssa.gov for more information).
Content created by Raymond James for use by their advisors.