Personal finance conversations to have before you remarry
March 15, 2014    Disclosures    POSTED IN  Personal Finance

If you are planning to remarry, you must decide how you and your fiance will combine your finances, and you will need to plan a financial strategy that considers the assets, liabilities, and financial responsibilities that each partner brings to the marriage. You will also find that financial planning for marriage is more complicated than it was the first time you got married, because your life is much more complicated now.

Many of the issues you face are no different than the issues individuals marrying for the first time must deal with. These issues include budgeting, savings and investments, insurance issues, integrating employee and retirement benefits, and property ownership issues.

1) Before getting married, have an honest talk about your finances

Before getting married, you and your partner need to discuss how you handle money, because money is a leading source of conflict in a marriage. Differences in how you and your partner handle and think about money can lead to hurt feelings, insecurity, and arguments. One person may be a saver, the other a spender. Also, you may have different financial goals than your partner. Money issues can be especially troublesome when you remarry, because you or your fiance may feel financially vulnerable if a previous marriage ended in divorce, particularly if it ended, in part, because of financial troubles.

You and your fiance must work out the terms of your financial relationship, setting up a mutually agreeable plan. Now is the time to decide if you want to keep separate bank accounts and to determine whether you want to pay expenses together or separately. Consider disclosing all your obligations and income to your partner to avoid any conflicts in the future and so that you can make sure that any budget you set up is realistic.

2) Consider using prenuptial and postnuptial agreements

Prenuptial and postnuptial agreements are contracts used by couples of all ages to define their rights, duties, and obligations during marriage and to determine what happens in the event the couple separates or divorces or one partner dies. If the contract is written prior to the marriage, it’s called a prenuptial, premarital, or antemarital agreement. If it’s written during the marriage, then it’s called a postmarital agreement. Couples who are remarrying should consider using marital agreements if they have substantial assets or children to protect and/or want to avoid some of the financial trauma that could occur if their marriage ends. They can spell out what assets and liabilities each partner is bringing into the marriage and determine how the assets brought into the marriage, and those acquired during the marriage, will be divided. They may also have an impact on your estate planning.

3) Consider keeping credit separate

One way to help you and your future spouse maintain a good financial relationship is to continue keeping your credit separate even after you marry. Instead of applying for joint credit cards, each partner can keep his or her own credit cards. This can protect you in several ways. If one of you has good credit but the other doesn’t, it can help the partner with good credit keep it. If you experience financial difficulties as a couple, keeping your credit separate will ensure that if one spouse’s credit suffers, the other spouse’s credit rating will remain unaffected. Keeping credit separate will also make it likely that if this marriage ends in divorce, only the individual who incurred the obligation will have to pay it. In short, you won’t end up paying your ex-spouse’s debts. If you or your partner have been burned financially in a relationship before, keeping separate credit might make you feel more in control and may prevent arguments that can hurt your current marriage.

The downside to keeping separate credit is that it can be complicated. If one spouse is working while another isn’t, the nonworking spouse may have trouble qualifying for his or her own credit. Trust issues and arguments over credit may also arise should one spouse have more credit or more accounts than another. In addition, you and your spouse may be able to qualify for a credit card or a loan much more easily if you apply together rather than separately, so keeping your credit completely separate may not be feasible. Furthermore, if you and your spouse run up a lot of expenses on both your separate credit cards, you may have to face the option of paying off only one spouse’s card, while sacrificing the good credit of the other; this scenario could generate some tension or conflict.

4) Pay close attention to the way your assets are titled

There are several ways ownership of assets can be designated. Couples who are remarrying should pay close attention to the way assets acquired after they marry are titled, because how their assets are owned may affect their current finances as well as determine who will receive the assets after they die.

For example, if you and your partner buy a car and sign the loan paperwork together, you own the car jointly (as joint tenants). Owning your car this way can be advantageous because it means that neither of you can sell the car without the other’s permission, and if one of you dies, ownership of the car will pass immediately to the other. (Note: Either of you can sell your interest in the car, even if you can’t individually sell the car outright.) However, joint ownership can also have certain disadvantages. For example, if your partner owes back child support, his or her ex-spouse may be able to claim that the car should be sold and the money used to pay back child support, and the court may order this. Or, if your spouse owes money to a creditor, the creditor may be able to place a lien on the property or force you to sell it to pay off the debt. The fact that you aren’t responsible for the debt won’t affect the creditor’s right to your spouse’s share of the property.

In addition, individuals remarrying should carefully consider how holding assets can affect their estate planning goals. For example, if you have children from a previous marriage and you want to make sure they receive your assets when you die, consider setting up a trust for the benefit of the children. To make sure that your spouse has access to funds immediately after you die, you may want to set up a joint savings account.

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