Marrying again? Financial must-dos

Allworth Co-CEO Scott Hanson shares why communication, transparency, and trust are key when saying "I do" again.

 

Second marriages are common.

In fact, between 30% and 40% of all marriages involve at least one partner who was hitched before.¹

Yes, divorce rates for all marriages remain high (though they seem to have leveled off). And while the end of a once promising union is of course a sad thing, I find the optimism of marriage to be inspiring.

Simply, when proper planning is undertaken, I’m all for them.

Financially, while joining forces with another person can lower your expenses, it can also add complexity.

Are you, or someone you love, preparing to walk down the aisle again?

Here are some things to consider.

Now is the time for full disclosure

We all know people who like parties and want to get married in style. While there is nothing wrong with this, the planning of a big wedding that will last an afternoon can easily overshadow a lifetime of previous financial decisions that have not only followed you both right up until the moment you say, “I do,” but which cling to you forever after.

Don’t wait until the stresses of planning the Big Day are upon you to sit down and have these important financial conversations. The moment the two of you begin to discuss marriage, you should also begin your conversations about money, finances, and expectations.

Sit down in a calm, private environment, and take a few minutes to:

• Write down your credit scores, and:
  • Note if you’ve ever filed for bankruptcy
  • Note if you’ve ever had any judgments against you
  • Note if you have any outstanding debts or obligations
    • How much debt, why, and is there a plan to pay it off?

• Write down all your assets:
  • This includes income
  • Property and vehicles
  • Investments and retirement accounts
  • Possible future inheritance or windfalls

• Write down any obligations you have from a previous marriage:
  • Do you pay alimony (officially or unofficially)?
  • How much money do you give your children each month?
  • Note if any of your assets are promised (officially or unofficially) to a former spouse or partner
  • Write down who the beneficiaries are on all your retirement accounts and insurance policies

• Next, take a few minutes to write down the following:
  • How do you expect to pay for your life together?
    • Will expenses be divided equally?
    • Will your incomes go into one bank account?
    • Will both your incomes go toward saving for retirement?

Once you’ve both had ample time to complete your financial resumes, then hand the information over to your partner.

And… This is where it gets difficult

Typically, the older we are, the more assets we have. Often, and certainly more so than when we are in our 20s, one partner will have accrued significantly more assets than the other.

You may know, and I certainly know, couples who broke up before the marriage due to one partner’s request for a prenuptial agreement.

A prenup (or prenuptial agreement, antenuptial agreement, or premarital agreement) is a contract entered into by a couple prior to marriage (or a civil union) that helps to financially protect the participants (and their respective families) when/if their marriage ends (by death or divorce).

No one wants to throw a bucket of water on a burgeoning union. But the fact remains that I’ve rarely seen anyone regret creating a prenuptial agreement, while I’ve known several people who regretted not having one.

The discussion of assets and how you are going to legally protect your money is no easy feat. But, if one of you...

• Has significantly more assets than the other
• Makes substantially more money than the other
• Is due to receive a future inheritance or insurance windfall
• Or, in many instances, even if children from an earlier marriage are involved

...then you are in prenuptial agreement territory.

Generally, how does a prenuptial agreement protect your assets?

When it comes to your assets, the main purpose of a prenuptial agreement is to keep money separate so that if the marriage ends in a divorce, one of the partners can not claim assets to which they are not legally entitled.

Prenups can protect your children

Even some of the richest people in the world make the mistake of remarrying and not protecting their assets. Typically, the entity that gets hurt the most in this scenario is the children from a former marriage.

This is not about shutting a second or a third spouse off from the wealth that one partner may have accumulated. It’s about fairness to families, and especially to children.

Remember, a prenup works both ways. It can also protect the new spouse from confusion and can make certain that the wishes of both spouses are carried out.

My experience has been that a vast majority of people of means, even during a divorce, want to fairly provide for their spouse, while also protecting their children.

Once the ceremony is over...

Just like a relationship, a person’s financial situation is likely to evolve over time. Once the ceremony is over, there will be some additional financial conversations that every married couple needs to have.

These include, but are not limited to:

• Should you buy an umbrella insurance policy?
• Do you need life or long-term care insurance?
• Are your insurance and retirement account beneficiaries up to date?
• Do you have you a will?

 

I’ve been married for more than 30 years. And I’m a big advocate, and a recipient, of the many rewards of a terrific partnership. But, obviously, it takes work and communication.

And as an advisor for more than 30 years, I’ve come to know far too many people who let important financial conversations slide for fear of ruining the momentum of the relationship.

Don’t let that be you.

I’d be willing to bet that the process of speaking clearly about money will teach you a great deal about your partner, both in how they view money, and what their expectations are for the future.

These are all things that each of us needs to know before getting married, be it your first, second, or even your third wedding.   

  

^{1 https://www.healthymarriageinfo.org/wp-content/uploads/2017/12/Remarriage-Trends-in-the-United.pdf}