Regardless of when you marry, especially given the trend these days of delaying marriage until your late twenties or early thirties, you likely have acquired assets prior to marriage. This is certainly true if you are remarrying after a long first marriage or both soon-to-be spouses have children. Let’s look at some topics of concern:
Assets and Liabilities. Do a complete review of both of your assets and liabilities. Assets include bank accounts, stocks, bonds, house, cars, retirement plans, insurance contracts and other investments. Liabilities are things like your credit cards, student loan debt, car loans and mortgages. In addition, note that there are rules in community property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin), where asset ownership is treated differently: in these states, the law presumes that assets will be owned jointly.
Daily Financial Management. You should next think about how’ll manage your financial obligations on a regular basis. Some couples combine their checking accounts, and some keep separate checking accounts. However, you should create a new joint account, into which both parties make a monthly contribution. Joint expenses are paid from the new account, and other personal expenses are paid with individual accounts.
Beneficiary Designations. Your retirement plans—like your IRA and 401(k)—have named beneficiaries. These should be checked regularly. The same thing should be done with your insurance policies and annuities. This is the perfect time to review who is currently designated, because any agreements from your first marriage may potentially inhibit your ability to update your beneficiaries. They should also be reviewed.
Update Your Estate Plan. A will states your final wishes and details how specific property will be distributed to your heirs. It also designates guardians for minor children and your executor, the person you nominate to make sure your wishes get carried out. It is an excellent time to review your will, to see if you should execute a new one or modify the existing one. Blended family dynamics can also have an impact when reviewing your estate plan. If either spouse has children from a previous relationship, adjustments to your plan may be necessary.
Trusts and Trustees. Ask your estate planning attorney about trusts, like a bypass trust, a qualified terminable interest property (QTIP) trust, or a spendthrift trust. One of these or another kind of trust may be a useful way to transfer wealth to children while imposing some restrictions. Dividing your assets between a surviving second spouse, the children from that marriage and any children from a prior marriage may result in some tension. One way to avoid this is to give an independent trustee the ability to make adjustments, so everyone is treated fairly and according to your instructions.
Thoughtful planning will let you meet your family’s fiscal needs and create a strong financial future with your new spouse.
Reference: Investopedia (May 29, 2018) “Second Marriage Financial Matters to Consider”