Getting remarried includes merging two well-established financial and emotional lives. Both partners bring accumulated assets, debts, forged spending habits, obligations and perhaps children to the relationship. Determining how to manage your financial assets to meet the needs, goals and expectations of each partner can help solidify a harmonious union – but may not always be easy.
Ideally, a couple embarking on marriage would discuss their finances, values and expectations beforehand. But few people do, because they perceive financial discussions as negative and do not want to detract from the joy of the upcoming marriage. Yet talking about financial histories and goals can strengthen a partnership by reaching an agreement on how to manage assets to support a shared lifestyle and individual goals.
Talking About Finances
As your relationship grows, trust is reinforced by honest communication, and planning a life together includes talking about financial expectations. The topic can be difficult and requires many discussions; it’s not something you can expect to work out in one sitting. But time spent talking with each other can help you understand what is important to your partner, how you both spend money, and what each other’s needs and dreams are. The following topics can serve as a starting point:
- How you decide how to spend your money
- Financial lessons from a previous marriage or relationship
- Goals – such as plans to buy a beach house or fund a grandchild’s education
- Monetary concerns – paying off debt, funding retirement, managing your assets
- Legacy goals – inheritance for your children, charitable donations
A financial planner can help facilitate a discussion to help you both determine what you want out of life, when you want it, and how to afford it. For example, some goals may be funded by an individual and others by the couple.
Your financial planner can also provide a neutral point of reference. Often people who have experienced a divorce or the death of a spouse have emotional issues attached to their finances. Rebuilding a life after losing a spouse is difficult and people may become self-protective or inflexible about their perceived needs and wants, creating an obstacle to blending a life with a new spouse.
In addition, your financial planner can help you discuss the estate planning needs that must be considered with a remarriage to reflect your new circumstances and priorities. These may include how to:
- Equalize an inheritance by redistributing assets
- Develop new assets to support your spouse or children
- Reassign assets through beneficiary status
- Design trusts to provide spousal support and/or protect assets for your heirs
- Assign assets to your new spouse to optimize estate tax exemptions
Strategies for Managing Finances
A number of factors may impact how you decide to manage your assets within a new marriage. These may include having accumulated assets you want to protect, how finances were handled in a previous marriage, providing support to ex-spouses and children, and/or imbalances of income, assets and liabilities. Working with a financial planner can help you structure a financial plan that is appropriate for your situation.
If you have assets you want to protect, consider a prenuptial agreement. This requires a full disclosure of each partner’s financial status and can help foster discussions about what each person is bringing to the marriage, how property will be titled, and how household expenses and existing debt will be paid. In addition, each partner should seek separate representation from legal counsel to ensure his or her best interests are secured.
Many remarried couples elect to keep their income separate, as well as their savings, retirement and investment accounts. This allows each person to maintain some independence and pay for their obligations from a previous marriage with their personal funds. (In this instance, a joint account can be used for household expenses and vacations.) But even if accounts are kept separate, it is important for the couple to agree on a lifestyle, spending budget and individual contributions to the household.
Regardless of whether you elect to keep your assets separate or blend them together, it is as a couple with new, shared objectives that you may find some benefits to working with one investment manager.
Merging advisors can help a family identify asset duplication and reach individual and joint goals.
About Katherine Phillips, CFP®, CRPC®, CDFA®
Katherine manages and deepens existing client relationships by solving financial complexities for clients so they can live their best lives with the resources they have. Katherine works closely with the client’s consultants including accountants and lawyers to help clients meet their most important financial goals.
Katherine holds the CERTIFIED FINANCIAL PLANNER™ designation, Chartered Retirement Plan Counselor and Certified Divorce Financial Analyst designations. Katherine works with families before, after and during transitions to help them make the strongest financial decisions. Focusing planning strategies on efficient tax strategies, their ideal savings and spending, and how to get them where they want to go.