Key Takeaways
With the divorce rate for second and third marriages much higher than for first marriages, it pays to have frank money discussions before tying the knot.
Be sure to align retirement objectives, children's education planning, and how to handle day-to-day expenses in the combined household.
Focus on open communication, trust, and careful planning (including prenuptial agreements) when there are wealth disparities between partners.
Thanks to pent up post-Covid demand, more couples walked down the aisle in the US last year than in the past 35 years, according to The Wedding Report. Interestingly, about one in five of those couples (21%) involved both spouses marrying for the second time.
Generally, that’s great news because many people don’t want to spend their golden years alone. And when it comes to seniors, men and women who are married tend to outlive men and women who are unmarried. Despite those benefits, second marriages come with plenty of new challenges, primarily the “melding of finances and families,” along with the ability to communicate honestly about both.
I bring this up because many of the divorced or widowed clients we work with come to us at some point to introduce a new partner or possible new spouse. Unfortunately, U.S. Census data shows that more than two-thirds of second and third marriages end in divorce, far higher than the 43% divorce rate for first marriages. If you or someone close to you is planning to get remarried, it’s important that both partners decide if they plan to disclose their financial circumstances to each other before tying the knot. They should also be crystal clear about how they plan to combine their assets today and, in the future, (if at all). Here are some important questions that we discuss with couples who are planning to remarry.
Do your retirement objectives align? If not, where are the gaps? Do those gaps change each partner’s need for things like life insurance?
Are there children involved? If so, how do you want to plan for things like education; or estate planning/inheritance?
Do you plan to commingle your charitable giving or keep it separate? This is very important when one partner comes into the marriage much wealthier than the other.
Are there any debts being brought into the marriage? How do you plan on handling situations in which one partner has a clean balance sheet and the other has debt?
Real World Examples
One of our clients who is fairly young and wealthy is planning to get remarried to someone who is not nearly as well-off. Our client has done a great job of saving for college for his three high school-age kids, but his fiancée has not saved well for her two younger kids. They’d like to combine their education planning for all five kids, but it won’t be easy. Whenever you're combining households and families, there is typically no correct solution. So, we advised them to take a step back and reevaluate the education planning for all five children going forward based on what they could afford with their newly combined household income and assets.
We have another client situation in which an older couple is planning to remarry. Both partners have adult kids, but one partner’s adult children are financially better off than the other’s. Is the spouse of the well-off children going to leave money to the less well-off children? In this scenario, they elected to keep most of their assets separated so they did not have to change their desired bequests and estate planning. Again, this is not necessarily a correct or incorrect strategy; it’s what works best based on the couple’s goals.
When we start working with couples who are planning to remarry, one of the first things we do is help them figure out a reasonable budget for their newly combined day-to-day living expenses. We also ask them to think carefully about making one partner responsible for paying all the bills or if they’ll each pay certain bills individually. If one partner will be paying all the bills, should they be entitled to a “stipend” from the other partner to make sure they always have enough cash in the “accounts payable” account? Again, there’s no single correct answer; it depends on what’s best for each individual couple.
Next, we look at a couple’s investments (both individual and joint) and possibly insurance needs and/or gaps. From there we will get into retirement and estate planning issues. We’ll often bring an estate attorney into the conversation and that conversation is largely driven by issues we’ve already discussed with the couple about combining their assets. This saves time and reduces the couple’s stress since they won’t have to spit back to the attorney the same information they’ve already shared with us.
Trust
When it comes to couples remarrying, we encourage them to disclose as much as possible to each other. That’s especially true when it comes to finances. For instance, we’ve seen situations in which one spouse may have tons of credit card debt left over from a first marriage, or an outstanding loan or other debt from before they met. Sometimes we must function more like psychologists than financial advisors because so much of a successful marriage is based on trust.
Every client situation is different when it comes to remarrying and we spend a lot of time with them tailoring their new financial plan to their desires. Some will want to commingle everything, and others will want to keep certain assets and investments separate and some joint. This ties into estate planning and inheritance and of course family dynamics, especially when adult children are involved. Again, that’s why open communication about finances is so important from Day One for couples planning to remarry.
Prenups
Finally, the sensitive subject of prenuptial agreements always comes up when couples are remarrying, especially if one partner has substantial wealth and the other does not. My colleague, Dan Satz, recently wrote a great post about this topic: Prenup for Second Marriages Tips and Challenges. According to Dan, “it's completely understandable and often prudent to want to protect assets and business interests that were established before entering a second marriage.” More importantly, “the earlier you bring up the topic with your partner, the better,” Dan advised.
Conclusion
If you or someone close to you has financial concerns about remarrying later in life, don’t hesitate to reach out. I’m happy to assist. Financial Considerations for Couples Getting Remarried
BRENDEN LEESE, CFP® is an Associate Wealth Advisor at Novi Wealth Partners
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