Another shot at happily ever after: financial advice for women who plan to remarry
By Kelly S. Olson Pedersen, CFP®, CDFA
More and more of us are walking down the aisle once again. According to Pew Research, nearly 42 million adults in the United States have been married more than once. In fact, the number of remarried adults has tripled since 1960.
However, particularly for women who are tying the knot for the second (or third) time, there is more to consider than simply what florist or caterer to use. Many women who are remarrying bring with them substantial assets that must be considered and protected. Not to cast a dark cloud on what should be a happy day, but the odds of divorce increase for those who remarry, rising to 60 percent for second marriages and 65 percent for third and fourth marriages.
For women who are determined to have their next marriage be their last, it is critical to make sure your financial house is in order before you say, “I do.” The following are four recommendations to get you started:
Talk openly and transparently about your finances
As many of us unfortunately know, nothing can derail a marriage faster than disagreements about money. There should be no secrets in a marriage, particularly when it comes to your finances. Nor should there be any assumptions. The key is to put everything on the table. Literally. Sit down with your future spouse and lay out your whole financial picture. Bank statements. Investment and retirement accounts. Appraisals and mortgages on your homes. And just importantly any debts and liabilities you have. Have an open and honest conversation about what you both are worth and what you owe. That way, you can begin your life together without any false assumptions and a full understanding of your joint financial picture.
Explore a prenuptial agreement
Not every couple needs a “prenup,” nor is it necessarily a bad thing or a sign of distrust. Quite the opposite. Prenups can bring peace of mind and protections to both partners entering into a marriage. To determine whether a prenup is right for your situation, hire an attorney who is experienced in facilitating that discussion. If you do decide a prenup makes sense for you and your partner, that should be communicated and discussed well in advance of the wedding day, at least six months, if not more. Afterall, no one wants to be handed a prenup to sign on the way to the venue!
Remember, prenups don’t have to be scary or threatening. They are as much about protecting you as they are about protecting your assets. There can be benefits for both partners based on how a prenup is written. For example, if you find yourself in a situation where your future spouse has significant assets in his or her name, a prenup can help you understand what it would look like upon you exiting the marriage. It can spell out what you would walk away with so that you can live in solace knowing you wouldn’t be left with little to nothing.
Maintain separate accounts, but also open new ones together
It’s only natural for couples in love to want to share everything once they tie the knot, including their financial accounts. Don’t. Particularly for women of wealth, it is important to keep your pre-existing accounts in your name and your name only. The reason being is that any assets you bring into a marriage are known as “premarital assets,” and in the case things don’t work out as you planned (see divorce statistic above), those assets are not up for grabs if your marriage ends.
That said, you want to start your life together on the right financial foot and begin building your joint financial picture together. That’s healthy and wise. Go ahead and create joint accounts for any go-forward assets and liabilities. Open new bank accounts together for shared income and expenses. Create new investment accounts as a couple. Take out a mortgage in both of your names for the dream house you want to build together. The point is to start fresh without co-mingling premarital assets. Lastly, if you anticipate an inheritance, deposit those funds into your separate (pre-marriage) accounts when the time comes, assuming you want that money to go to your children or grandchildren.
Revisit your estate plan and beneficiaries
A thorough review of your estate plan is extremely important for women who have children from a previous relationship, particularly if they will be entering into a newly blended family. You want to be very clear as to who gets what in your estate plan so that you don’t inadvertently create infighting and animosity between your heirs and your spouse’s heirs when you pass. That is all too common.
Yes, you will likely want to leave much of your estate to your children and/or grandchildren, but don’t leave your new spouse out in the cold. Make sure your estate plan has provisions that will allow your spouse to live the lifestyle you want him / her to live after you are gone. In other words, strike a balance between taking care of your heirs and your spouse. For example, would you want the house that you and your new spouse are living in to suddenly go to your kids in the event you died unexpectedly? Probably not.
One last “tip” (pun intended). For women with children or other beneficiaries, consider including a QTIP provision in your estate plan before you get married. In doing so, you can leave your assets (or a portion of them) to your spouse when you pass, but when your spouse eventually dies, those assets will revert back to your children / heirs (a beneficiary YOU have chosen) instead of going to beneficiaries of your spouse’s choosing (that you may not have approved). Essentially, including a QTIP provision in your estate plan prevents your spouse from changing who receives your assets after you die.
For any woman, getting newly married should be a joyous and hope-filled experience. And it can be exactly that provided you make sure your finances are in order and you and your fiancé are both on the same page when it comes to money. By doing so, you will be much better positioned to achieve your happily ever after.