Remarriage, especially later in life,i can be more complicated than first marriages: Couples are further along in the career path, and may have accumulated more assets and debt. If this is you, perhaps a previous marriage could have put you behind on long-term financial plans and retirement, and you may still be playing catch up. Retirement is no longer a faint glimpse on the horizon, but rather a concern that remains in steady view.
Previous marriages with children add additional considerations, whether the children are at home or on their own. They can impact both the monthly budget and estate planning decisions for the new couple.
Currently, the divorce rate is holding steady at around 50%, with nearly 40% of new marriages involving at least one partner who has been down the aisle before¹. A second marriage involves a lot more financial preparation than staying within a designated wedding budget. The increased complexity of combining two households requires creative solutions for millions of new couples.
How financial matters are addressed before and after the “I Do” will have a lasting impact on the combined family structure and how the growth and preservation of the couple’s wealth will manifest.
Here’s 8 things to consider before saying “I DO” when you have both assets and debts involved:
- Know The Financial Background of Both Parties. Discussing money may not be romantic, but surprises can destroy trust. Know what you are signing on for through full disclosure of your financial situation. What is the status of retirement accounts? What debt is coming into the union and who will be responsible for payments? Are assets, like homes, encumbered with loans and what payments and upkeep are required? Knowingi the financial reality of both parties can assist with creating a strategy for combining assets and eliminating debt, so everyone wins. Someone who is unwilling to be forthcoming about financial details may create a red flag for what’s to come.
- Who Will Be Responsible for Which Bills? Understand upfront who will pay what, which helps set expectations and reduce misunderstandings. In the process of a remarriage, someone typically must move. If you have ownership in the vacated property, decisions must be made on whether to sell or rent and what will happen to the proceeds. Will the checking account be managed through a central joint account or will each partner manage finances independently while dividing the bills? There is no right or wrong way to manage household finances as long as both of you agree on the process.
- Should You Get a Prenuptial Agreement? Couples with assets (and debts) often look to a prenup before the wedding to clarify what everyone is bringing to the table and how things will be divided. Many second marriages have already seen possessions divided through a divorce and want to protect assets from further division.
- Child Support and Alimony that must be paid (or received). For those on the receiving end of child support or alimony, it might be a source of income reliant on the previous partner. Paying child support or alimony is an expense that can grow as the spouse’s income grows and the child’s financial needs change. Payments can have a significant impact on the family budget until children reach 18 or even through college. Alimony may be for established for a set number of years, or until the ex-spouse remarries, depending on the divorce decree. Mandatory outflows like child support can impact the budget, whether or not additional children come to the new family. Additional household income from a new spouse should not impact child support payments, although total household income for the custodial parent impacts financial aid for children entering college.
- Remarriage and Social Security or Pensions. Payouts in retirement might be available for previous marriages that lasted over ten A remarriage could eliminate the option of collecting from the previous spouse’s Social Security earnings record. The elimination of Social Security payments for widows under the age of 60 and pension qualifications can be affected.
- Long-term Health Care Costs. The cost of health care can rise significantly for those over the age of 50. Due to the Affordable Care Act, and the elimination of any preexisting conditions, age plays a bigger role in premium costs. In many states, the liability for out of pocket insurance costs can flow to the spouse, potentially leaving you with a large financial burden you were not anticipating. Long term care and quality health insurance can mitigate the risk of losing precious assets to pay for an illness.
- Planning for Your Estate should be discussed before marriage. Estate planning is essential for those with children, regardless of the size of your estate. Most intestate laws (applying to those without a will) pass assets to the spouse. Some states divide assets between the spouse and children ofi the deceased, at designated percentages. Second marriages typically present unique circumstances that should be addressed to ensure your desires for asset distribution to heirs are carried out. Wills and trusts may provide for the remaining spouse as well as protect assets for children from a previous marriage.
- Joint Accounts and Beneficiaries impact financial responsibility while you are together and how assets and debts will be divided. Couples in subsequent marriages may not want to hold assets like homes jointly, giving you more flexibility in asset distribution. Keeping debt separate can also limit which assets a debt collector may pursue. Estate attorneys can assist with titling assets in a way that protects both the individual and heirs.
Finding love the second time around is a wonderful thing. Couples are living longer, and many widows and widowers are finding love at older ages. This new trend toward senior remarriage is bringing to light consequences and considerations that were not present the first time around.
Communicating your wants and needs regarding your financial security can help both parties care for each other as you age, while building a strong financial foundation.
If you are burdened with high amounts of credit card debt and are struggling to make your payments, or you're just not seeing your balances go down, call Timberline Financial today for a FREE financial analysis. Our team of highly skilled professionals will evaluate your current situation to see if you may qualify for one of our debt relief programs. You don't have to struggle with high interest credit card debt any longer. Call (855) 250-8329 or get in touch with us by sending a message through our website here contact-us