Key takeaways
If you’re marrying again, it’s important to talk about finances before the wedding, especially in a blended family or one partner has a higher net worth than the other.
A few to-dos include discussing whether to merge finances or keep them separate, making sure beneficiary designations are current and determining if a trust is right for your situation.
A financial advisor can help you navigate sensitive discussions about finances and remarriage.
Remarriage offers the promise of a fresh start. However, navigating the financial landscape of a second (or more) marriage can be a bit more complex than the first time around.
Let’s explore the financial conversations couples should have before entering a second marriage, including financial goals and priorities, whether to combine your finances, and potential legal obligations to consider.
“Second marriages can come with a number of complexities,” says Shannon Baustian, Private Wealth Advisor with U.S. Bank. “Child support obligations, spousal maintenance obligations—those all may be in place for one party or another. And often, people are coming into the relationship with separate property or maybe even separate businesses.”
Taking the time to discuss your finances before you remarry is the best way to avoid tricky conversations down the line. Here are some tasks to consider.
As with any marriage, both parties should prepare to have a conversation about their individual financial histories. Take the time to review your income, assets and debts, outlining what you will bring to this new marriage and any financial obligations you may have to a previous spouse or children.
Couples should plan on being transparent and open in these conversations, which will lay the groundwork for a solid financial partnership. And if you find these discussions difficult to have, remember that you don’t have to go it alone: Baustian notes that sitting down with a financial advisor can help set your marriage up for success from the start.
“With second marriages, there can be prior wealth accumulated or blended families, and the financial obligations that are involved should not be swept under the rug.”
Shannon Baustian, Private Wealth Advisor with U.S. Bank Private Wealth Management
“With second marriages, there can be prior wealth accumulated or blended families, and the financial obligations that are involved should not be swept under the rug,” she says. “It can be especially helpful in these situations to have an advisor guide you through these conversations.”
After discussing individual financial histories, you should cover your financial goals and expectations. This is a great time to talk through what your ideal retirement looks like, as well as other long-term savings goals.
You might also bring up anticipated expenses on the horizon. For example, if you have children from a previous marriage who will be attending college in the coming years, you should talk about educational expenses or other upcoming costs.
To ensure a harmonious discussion, Baustian recommends going into these conversations with compassion and an open mind, remembering that you’re building a foundation for your financial future.
“It’s important to allow each other to be open and vulnerable,” she says. “Hopefully, as you’re preparing to get married, that’s already been cultivated, and you can build on that as you create your financial partnership.”
Depending on your situation, remarriage can come with specific legal obligations to consider, such as child support or alimony payments.
“Legal pressures come into play more often in a second marriage, depending on how complex the prior marriage was or how it has or hasn’t wrapped up financially,” Baustian explains.
You should be forthcoming about what kind of financial obligations, if any, remain from a previous marriage, and how those will factor into your future financial life together.
Once you’ve had these crucial conversations about your financial histories and what you envision for your future, it’s time to get practical and determine if—and how—you want to combine your finances.
When it comes time to merge your finances for your second marriage, some people choose joint accounts while others may want to maintain separate accounts. There’s no one-size-fits-all solution, but there are ways to decide which path is right for you.
After you’ve discussed how you want to combine your finances, you’ll need a budget that represents your new financial partnership. You can use your new budget to help you track your income and expenses, as well as allocate funds for shared goals and responsibilities.
However you want your partnership to look, it’s important to start fresh with this new marriage by creating a budget that helps you stay on track to meet shared goals, while ensuring both parties have transparency into how funds are spent and how much is allocated for different spending categories.
Couples who are remarrying may find a prenuptial or postnuptial agreement helpful when preparing to combine finances. These agreements are often wise if you’re bringing separate assets into the marriage—such as an inheritance or existing property—and you want to specify how those assets will be treated. If you have children from a previous marriage, a prenuptial agreement can also help you clarify which assets you want to designate to your children.
“A lot of times, someone may specifically want the wealth that they’ve grown prior to their new spouse to go to their children,” Baustian explains.
A prenuptial agreement is a legally binding contract between two people before they get married. It specifies each person’s assets (such as real estate, investments, bank accounts and jewelry) and debts, and outlines how these assets and debts would be allocated if the couple divorced or if one spouse died. It can also include provisions and outline custody for children from previous marriages.
A prenup can be particularly important for people entering second or more marriages who may bring significant assets to their new marriage.
A postnuptial agreement is very similar to a prenuptial agreement, except it’s drawn up after a couple is already married. In many cases, a couple will decide to create a postnup if one spouse inherits a large sum of money or a significant piece of property and wishes it to remain theirs. While prenuptial agreements are considered by divorce courts to be binding, postnuptial agreements are more likely to come under scrutiny.
Prenuptial and postnuptial agreements, along with ensuring your estate plans are up to date, can help clarify how you want accumulated wealth, either prior to or during your marriage, to be handled.
There’s more to finances after remarriage than bank accounts. Life insurance and estate plans are critical to ensuring your new family has a safety net—and that beneficiaries are established.
Revisiting things like life insurance policies, estate documents and beneficiary designations are crucial in any marriage—but particularly important when it comes to remarriage.
“Life insurance becomes a big player in a second marriage,” Baustian notes, “especially if there are children or other existing financial-support obligations in place.”
You’ll want to review existing insurance policies, including health, life, and disability insurance options to make sure you have updated coverage. You’ll also want to update your beneficiaries for those policies as needed.
As you update your insurance policies, don’t forget to update your estate planning documents too. At the bare minimum, everyone needs a will, powers of attorney and healthcare directive, but a trust can be especially helpful in a second marriage, ensuring your assets are allocated the way you desire.
“When there’s wealth that’s accumulated as a result of one party’s inheritance, for example, a trust often will come into play so that you may keep certain assets with your children,” explains Baustian. “On the other hand, it may also come into play when new spouses want to provide for each other if one should pass away and they want to avoid any issues between a stepparent and the children.”
Just like your life insurance policies, as you update your estate plans, be sure that you have the beneficiary designations in place to ensure your assets go to the people of your choosing.
You’re ready to tie the knot and start a new chapter—but couples entering a second marriage should be sure they’ve tackled each of these to-dos first:
Getting married will always come with its fair share of difficult discussions—but in a second marriage in particular, financial conversations are crucial to ensuring you’re building a solid financial partnership. Being proactive with your financial planning may involve seeking out the guidance of a financial advisor when necessary, maintaining open and honest communication throughout the process, and being thorough in what you cover to ensure both parties are on the same page.
“I think the biggest thing is just constant conversation and agreement to get support periodically, whether it’s a financial advisor or a family counselor” says Baustian. “Second marriages can involve more complex financial circumstances, and you don’t have to navigate everything on your own.”
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