Understanding Financial Considerations Before A Second Marriage | Risks and Opportunities
Disagreements about money are the number one cause of arguments among married couples. If you have already exited your first marriage, you might be all too aware of this. Unfortunately, it gets even more complicated the second time around. At Altman and Associates, we help people navigate the financial complexities of divorce and remarriage.
Understanding The Basics
The basic principles of sound financial management in a second marriage are:
- A clear understanding of exactly what belongs to who;
- Thorough planning that takes into account various contingencies;
- Honest and skilled communication between you and your second spouse, and between you and your intended beneficiaries (children from a first marriage, for example); and
- A firm commitment to putting everything into writing.
Do this job well, and your second marriage could turn out to be far smoother financially than your first one.
Issues Likely to Arise
Part of the trick involved in navigating the finances of a second marriage in Maryland is imagining what could go wrong. Although a full list if these contingencies is beyond the scope of this article, below is a sample of typical concerns:
- Do you have any joint debts with your first spouse? Remember that creditors are not necessarily bound by the terms of a divorce settlement when it comes to joint debts.
- Are any of your assets co-mingled with those of your new spouse? Your portion of the comingled assets might be reachable by creditors of your former spouse, and it might be difficult to tell whose assets are whose.
- Do you own any assets owned jointly with your second spouse? If you do, and if you die before your second spouse does, these joint assets will revert to your second spouse, not your children from your first spouse. A properly-constructed trust can avoid this problem.
Steps to Secure Your Finances
Following are a few of the steps you can take that will help straighten out your finances in the wake of a second marriage. You will probably need to take other steps as well, depending on your individual circumstances:
- Take a complete inventory of your assets and liabilities: Your assets include real estate, bank accounts, stocks, bonds, house, car, retirement accounts, insurance policies and other investments; while your liabilities include credit card debts, student loan debts, car loans, mortgages, etc.
- If you have co-mingling of assets with your second spouse, determine much of it belongs to you, how much of it belongs to your second spouse and how much of it is joint property.
- Determine whether you should maintain separate checking accounts with your second spouse, open a joint checking account, or both.
- Determine who will pay income taxes and whether you will file jointly or “married filing separately”.
- Check your beneficiaries for insurance policies, annuities and retirement plans, and update them where necessary.
- Revise your last will and testament and any trusts, etc. that you may have included in your estate plan.
- Revise any health care proxy or power of attorney: If you designated your first spouse the power to make health care or financial decisions in the event you become incapacity, failure to update this designation could cause serious problems, especially if you are not on good terms with your ex-spouse or if you no longer trust him or her.
- Conclude a prenuptial agreement with your second spouse if appropriate.
The Bottom Line
The foregoing is just the tip of the iceberg when it comes to re-arranging your finances to take into account a second marriage. Ideally, you should begin the process of managing the finances of your second marriage before you even tie the knot. It is never too late, however.
Don’t let evolving circumstances determine your destiny – take decisive action today. Call us today at 301-468-3220 or visit our contact page to schedule a consultation at one of our offices in Maryland, D.C., or Northern Virginia. Through our family law division, Wise Family Law, we can also provide comprehensive support for divorce, custody, alimony, mediation and much more.