Posted by Cindy Wilson.
Some old cynic called second marriages “a triumph of hope over experience.” While it’s true you’re more experienced the second time around (and therefore a bit smarter about your finances), you’re also up against some fresh challenges. Sadly, more second marriages end in divorce than first marriages1—and that’s partly because the following four things get overlooked:
#1. Is Cupid OK with his (or her) finances?
Divorcees often rush into second marriages with enthusiasm, especially if they are trusting and optimistic by nature.
My mom recently announced she’s getting married, with her characteristic optimism. Enter stage left, her practical-minded daughter (me), with a bucket of cold water to rain upon her proverbial parade. Learning about his personality traits was important, but I was itching to know his credit score. They have common interests, which is terrific; I was more interested in his financial history.
Matchmakers and marriage counselors talk so much about emotional needs, and so little about the practical side of setting up a household, that if you’re not careful you might neglect the nuts and bolts of married life on your rush to the altar; for a better shot at long-term happiness, have the conversation early.
#2. Hashing out who owns what.
Couples enter second marriages with a lot more baggage—in more ways than one.
As well as having a conversation about how to split household finances, you’ll need to be upfront about how to divide assets that were accrued in your former lives. Finances are more complicated the second time around, leading to potential problems later on.
Draw up an inventory of your assets coming in to a marriage; take a snapshot of the beneficiaries and other designations. Make it clear to your spouse who is designated what asset. I advise employing separate attorneys, with you and your new spouse drawing up separate arrangements. Your own attorney will look out for your best interests, in the event of your or your spouse’s death.
#3. Are the kids all right?
Often in second or third marriages, children are involved, complicating the division of assets. A qualified terminable interest property (QTIP) trust can be set up to ensure that income will flow to your new spouse upon your death, and then to one of your dependents or family members (rather than, say, your spouse’s children from a previous marriage).
There are plenty of strategies to help keep everyone happy; you may for example have a life insurance policy, for which you could change your beneficiary to your new spouse, and designate your assets to your children. Talking to an estate planning attorney can help you determine a strategy that is right for you.
#4. Maintaining separate accounts.
If you haven’t tried it already in an earlier marriage, consider having separate bank accounts. It nips in the bud arguments centered on spending; you don’t have to justify the purchase of that bracelet; he doesn’t need to apologize for his newest golfing equipment.
Sadly, I’ve seen cases where one spouse not only controls all the household finances but also the other spouse’s online accounts. As the marriage headed towards irreconcilable differences, one had exclusive access to the other’s entire nest egg. That’s never a position you want to find yourself in. What you can choose to do is give your spouse access to view your account (if, for example, they manage household expenses) with a limited power of attorney, or a full power of attorney (in the event you become incapacitated and want them to be able to make distributions).
Getting married is an exciting time—just be sure to take a few steps to plan out the finances. Unfortunately, the financial implications are often more apparent to people exiting rather than entering a marriage. If you have been through a divorce, you’ll know from experience that money plays a leading role—and that it’s better to nail down your estate planning on the front end. That way you can enjoy your marriage with great expectations of a happily ever after!