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Older couples tend to be more steadfast in their ways when managing their money. They have also had more time to amass considerable wealth. When one spouse is a spender, and the other is more frugal – or when one partner has far more resources than the other – it is trickier to combine financially.
When one or both partners have young children from a prior relationship, a whole new set of issues, like the payment or receipt of child support and perhaps alimony, come into play. There are inheritance and retirement-income-related difficulties to be resolved even when there are adult children.
Following are some suggestions to consider when remarrying:
Make a priority list after a detailed discussion regarding finance
Before marrying, discuss finances with your spouse. This will avoid disagreement and better understand your financial condition. Based on this, you can review the following together:
- Review credit reports and scores to discuss each other's credit histories.
- Find out how much debt each spouse has and how comfortable they are with it.
- Decide on a method for splitting bills, savings, and paychecks.
- Create a single joint account along with separate accounts for each partner.
- Decide whether one of you will be the primary provider or will both be making equal contributions.
- Compare your investment methods and approaches, such as your level of aggressiveness or conservatism.
- Determine the amount of savings you should have as a pair.
- If you still need to retire, talk about your retirement plans.
- Share your current and future residence plans.
- Talk about how you'll pay for regular child expenses and the college or school fees for children from a previous union or partnership.
- Create a legal agreement about the children with any former partners.
- If multiple debts are the issue, you can consolidate your debts to get rid of them.
Work on an estate plan
Planning your estate is essential. Organize your property to ensure that your family's financial requirements and objectives are satisfied after your passing. When children from past relationships are involved, estate planning is especially crucial since it guarantees they will receive what is legally theirs. Remember that different states have different estate-related laws.
Draft the prenuptial agreements as soon as possible
Many financial advisors, estate planners, and accountants suggest prenuptial agreements when you plan to marry or remarry later in life. Even if they are retained in one person's name, all assets and income acquired during a marriage often become community property. A prenuptial agreement (to which both spouses willingly agree) is a written document that specifies the terms and circumstances for dividing up financial obligations and assets in the event of divorce.
A prenuptial agreement is crucial if you and your potential partner have significant economic or resource differences. Because state laws don't usually accept postnuptial agreements, the arrangement should be discussed and finalized with a lawyer before the wedding. If you divorce or pass away, the prenuptial agreement can help establish what will be left over for each family member to inherit.
Prenuptial agreements often cannot address issues like child support, visitation privileges, or custody that are covered by divorce decrees. A prenup cannot be utilized for non-financial matters because it is a financial tool. For instance, you cannot force your spouse to make cupcakes every Sunday evening. Additionally, you cannot decide who will change their name or establish decisions regarding kids using a prenuptial agreement.
An estate plan is a fantastic approach to ensure you are providing for your spouse and managing your kid's inheritance simultaneously because many of the exact details of preparing a prenup are necessary for an estate plan.
Wills and trusts
A prenuptial agreement can prevent your spouse from contesting your will or any current trusts. Whether or not a trust is impacted depends on who the beneficiary or beneficiaries are and how the trust was established, including whether it was done as part of a divorce settlement or child support agreement, which could make the trust less flexible.
Some trusts, like a qualified terminable interest property trust (QTIP), provide security for your first family and support for your spouse following your passing. The assets your spouse inherits from you when you pass away will go to the children from your first marriage or other heirs of your choosing rather than your spouse's heirs, thanks to a QTIP, which also provides income for your spouse.
Later-in-life couples should have separate wills instead of joint ones. Having two wills reduces the possibility of future property distribution issues significantly because life circumstances can change during your marriage.
Keep your powers of attorney, such as your medical or health care proxies, up to date. Review your beneficiaries for the following:
- Wills
- Life insurance policies
- Retirement accounts
- Investment funds
- Any other financial accounts
Choose how to manage shared assets and debts
Discuss the numbers while being completely transparent. Setting priorities is the issue. Share your contributions to the marriage, rank your shared priorities, and then create a budget based on those priorities.
Some financial topics to discuss:
- Assets include real estate, 401(k) or IRA accounts, investments, and bank accounts.
- As income, count paychecks, rental income, and any other monetary source.
- Automobiles, credit cards, mortgages, student loans (for you or your children), and personal loans top the list. Consider sharing your credit scores if you have planned significant expenditures (such as a new car or vacation property).
- Other crucial things, such as child support and alimony, if you qualify.
Update your tax filing information
New couples are advised by the Internal Revenue Service (IRS) to make sure that the initials on their tax returns correspond to their names on file with the Social Security Administration (SSA). Otherwise, any tax refund could be postponed.
Also, consider whether filing jointly or separately with your spouse makes more financial sense. Before getting remarried, be sure that both of you have resolved any tax disputes with a former spouse. You can file a joint return with your new spouse if your spouse passes away and you get remarried before the end of that tax year.
Update details with the Social Security Administration
When a name change occurs, newlyweds should contact the SSA to ensure wages are correctly recorded. You can receive the Social Security benefit shown on your record plus an additional sum. It helps you to get half of your new spouse's benefit if you marry after reaching full retirement age and your benefit is less than half that of your spouse. Usually, this happens after a year of marriage. If you remarry, any divorced spousal benefits you receive will stop. A spouse who marries again before reaching 60 is not eligible for widow or widower benefits.
However, if you get remarried after turning 60 (or beyond age 50 if you're disabled), you'll still be eligible for benefits based on your ex-earnings spouse's history.
Review Medicaid benefits
Medicaid is a health benefits program for the underprivileged that may be impacted by marriage. A person getting Medicaid benefits who marries someone with a more significant income risks losing coverage because Medicaid depends primarily on household income. To find out how marriage can affect your benefits, check the eligibility regulations in your state.
Lyle Solomon has extensive legal experience as well as in-depth knowledge and experience in consumer finance and writing. He has been a member of the California State Bar since 2003. He graduated from the University of the Pacific’s McGeorge School of Law in Sacramento, California, in 1998, and currently works for the Oak View Law Group in California as a Principal Attorney.
Read more articles by Lyle Solomon
Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.
