by Sheila Jacobs, Wells Fargo Advisors
So you’ve walked down the aisle and unfortunately, wedded bliss was not sustainable. With 40-50 percent of American marriages ending in divorce, you’re not alone.
And while you try to avoid being jaded and hope that the next chapter of your life includes the fairytale marriage you’d dreamed of, the fact is that a whopping 60 percent of all remarriages end up failing, too.
If you’re about to walk down the aisle a second time and thinking about the finances of remarrying, you may want to consider the following steps to get your new life off on the right financial footing:
1. Put all of your financial cards on the table. While the process may seem a little awkward, it’s important to share a full accounting of your assets and liabilities. Partners should share with each other documents such as tax returns, pay stubs, and bank and investment account statements. Discuss any financial obligations you have to your ex-spouse, children, or to your extended family. You each may want to run a credit report and share it with the other so you both know what you are getting into financially before you walk down the aisle.
2. Consider a prenup. It may seem unromantic, but remarrying couples should consider whether a prenuptial agreement would be appropriate. Prenups don’t just spell out how assets should be split if the marriage fails; they also come into play if one of you dies. A prenup is especially advisable if you are bringing a lot of wealth or assets into the marriage or if you have children from a previous marriage you want to protect.
3. Discuss your financial goals and philosophies. Are you a spender or a saver? Do you want to be able to support your aging parents as they get older? At what age do you hope to retire? Do you want to have children together? These are among the critical questions that play into the finances of remarrying. Before you tie the knot a second time, it’s important to examine what money issues caused stress in your first marriage and what steps can you take to avoid them in the future.
4. Decide who will pay for what. Discuss whether you are going to pool your assets and have a joint account, keep your assets totally separate, or have separate accounts as well as a joint account to which you both contribute. There’s no right or wrong method, as long as you both are comfortable with it. Keep in mind that if you decide to keep your premarital property separate, it’s important not to co-mingle it with property that you acquire during your marriage. Be careful, for example, about how you handle dividends on equities that you owned before the marriage. In some states, earnings on separate
property earned during the marriage are considered marital property. While the stock itself can stay in your original account, the dividends are technically being accrued by both of you and should be segregated in a separate account.
5. Change your account beneficiaries. Many people forget to change their beneficiary designations after they divorce. In most states, that means your divorced spouse will inherit your IRA if he or she is still named as your beneficiary. Now that you’re remarrying, take the time to update the beneficiaries of your retirement plans, annuities contracts, investment accounts, and insurance policies. If you want specific benefits to go to your children rather than your new spouse, you may need to get a spousal waiver.
6. See your financial advisor. Your financial advisor can help the two of you work through the finances of remarriage and help to create a financial plan together.
Wells Fargo Advisors does not render legal or tax advice. You should consult with legal and tax advisors before making any investment decisions that would have legal/tax consequences.