Second-Marriage Money Mistakes
Date: June 10, 2016
Money problems are a major contributing factor in many divorces. With second marriages, money issues can be even more problematic, as there are often leftover financial obligations from your first marriage. Discussing finances upfront can help prevent money from becoming a huge issue in second marriages.
Failing to Update Beneficiaries
Legal issues regarding finances can get more complicated when you remarry. To protect assets for your children from a prior marriage, it's important to update your will. If your new spouse inherits your entire estate, it could affect your children's inheritance.
Your retirement plan and insurance policies should also be reviewed, since your former spouse may still be listed as a beneficiary. For most pension and retirement accounts, federal law guarantees a 50-percent share to a current spouse in the event of death, so if your prior spouse is left on the account as the beneficiary, he or she might get the other 50 percent.
Concealing Income and Benefits
Concealing anything in a marriage can lead to distrust and resentment. This is particularly true when it comes to money matters. Negative experiences in a first marriage could lead to hesitancy to discuss finances openly in a second marriage, but that would be a mistake.
Each spouse should be aware of the financial habits and assets of the other to avoid money from becoming a major issue in the marriage. Credit card debt, income, job security, insurance policies and retirement plans should all be open for discussion.
Overlooking Existing Obligations
Former spouses and children from your prior marriage often have financial demands that new spouses need to know about. If you're subject to a qualified domestic relations order, or QDRO, you may be legally bound to keep your ex-spouse as a beneficiary on a retirement account.
Child support and spousal support payments to your ex-spouse can also be a drain on current resources. Any financial arrangements tied to your divorce agreement should be discussed with your new partner.
Not Considering a Prenup
Not every marriage requires entering into a prenuptial agreement, but it should at least be part of the conversation. A prenuptial agreement, or "prenup," is a legal document that outlines the financial rights and obligations of each spouse in case of divorce.
It is a signed contract entered into by both parties before marriage. Prenups are typically used to protect wealthy spouses from losing specific assets, such as a family business, if the marriage fails.
If both spouses are entering a second marriage, the prenup conversation might actually be easier, since both have gone through the difficulty of dividing assets after a divorce. One of the benefits of setting up a prenup is that you both learn about each other's finances before the wedding. By putting all of your assets on the table, money is less likely to drive a wedge between you.
- Bankrate.com: Remarrying? Say "I Don't" To Money Mistakes
- Fidelity: The Second Time Around
- LegalZoom.com: Marriage and Wills
- TIAA-CREF: Strategies for Second Marriage Planning
- Connors & Sullivan: Beneficiary Designations -- Getting the Right Assets to the Right People
- FindLaw.com: Prenuptial Agreements