When Eric asked me to marry him,7 after I had divorced my first husband, I had zero reservations about the strength of our love. But, love aside, second marriages are complicated for most, and we were no exception. We both had children of our own (me two, him one), established careers, separate homes, hobbies, ex’s, and complex family dynamics.
While I was excited beyond measure to start our lives as a blended family, I wanted to be sure that everything I’d worked hard to establish was protected. I also didn’t want to repeat prior mistakes of my first marriage, where I gave up control of my financial future. So, I made a list of financial considerations we should discuss. We set time aside to have deep and real conversations and eventually developed a way to weave our financial worlds together that felt comfortable to both of us.
Often money catalyzes conflict in a relationship, but it doesn’t have to be so. Constructive conversations about money realities can get the marriage off on the right foot and create the building blocks for a strong financial foundation.
Here are the eight critical conversations you and your partner should have if considering remarriage:
- Air your financial laundry. Total Assets, liabilities, credit card debt, prior bankruptcy filings …. It all must be put on the table to avoid conflict in the future. This airing of the financial laundry can help to strengthen the relationship, engender trust, and set the tone for how to talk about money in the future.
- Talk about your values around money. What does money represent to you? What do you want to use it to accomplish in life? Would you describe yourself as a saver or a spender? Do you take comfort in having a financial cushion or emergency fund, and if so, how much of a buffer? Share early childhood memories about money to gain perspective of deeply rooted feelings.
- How would you like to care for your loved ones after you are gone? While many people wait until after their wedding to update Wills, it is often helpful to diagram a clear path for your assets to follow when you die. This exercise will help you crystallize your thoughts as to the distribution of your assets and the level of control your surviving spouse should exercise. You can then work with an estate planning expert to explore strategies such as revocable trusts, qualified terminable interest property trusts, and irrevocable life insurance trusts, which can help ensure that spouses, biological and stepchildren receive the intended inheritance.
- Decide how you will combine your finances. Will you keep separate accounts? Combine everything? Will one person take over the paying of all bills, or will you decide on a split? Also, make sure to review any tax implications of remarriage with your accountant.
- Revisit the titling of your accounts. Typically, retirement plans, life insurance policies, annuities, bank accounts, and brokerage accounts require beneficiary designations. These accounts don’t go through the probate process; the money or benefits transfer directly to the beneficiary. Several courts had upheld rulings where the beneficiary designation overrode the Will, even when the decedent had been remarried and had dependent aged children with the new spouse.
- Pick a residence. You may both own primary homes, making it important to decide which one you will live in and what you will do with the remaining house. Real estate decisions may have tax consequences, so be sure to add it to the talking points for your accountant.
- Revisit long-range plans and decide how you’ll fund your retirement years. If you have spousal Social Security benefits from your ex-spouse, they will go away when you remarry. You may, however, be eligible for spousal benefits on your new spouse’s plan.
- Think about future health care needs. If still employed, compare employer’ sponsored health care plans and see if it makes sense to change coverage. Think about long-term health care needs and make one another aware of any organ donation preferences, healthcare directives, or powers of attorney you have in place.
It’s no secret that marriages take work and requires open and honest communication. While talking about money and even admitting to money mistakes is never easy, it is crucial in laying the foundation for your lives together. Discussions about money and financial realities can bring the two of you closer and help you work together to achieve your financial and life goals.