Money milestones: Financial moves for a 2nd (or 3rd or 4th...) wedding

by Brian Acton
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Money milestones: Financial moves for a 2nd (or 3rd or 4th...) wedding

If you’re planning your wedding for the second (or third, fourth, etc.) time around, you’re already well aware that marriages can end.

Doing some financial legwork before walking down the aisle can help you and your future spouse avoid conflicts and complications. Here’s how to prepare your finances to get remarried.

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Consider a prenuptial agreement

While many people may consider prenuptial agreements a harbinger of marital failure, the reality is it’s one more way you can protect each other and your financial well-being. Prenuptial agreements will protect your income and assets prior to the marriage. It also determines what happens financially in the event of divorce, including who gets custody of children.

Couples may not be entering a marriage believing it will end, but they need to consider the possibility of divorce or eventuality of death, said Leah Hadley, founder of Great Lakes Divorce Financial Solutions. A prenuptial agreement prepares for that scenario.

“A prenuptial agreement can do more for you than just spell out what will happen in case of a divorce. It is a good way to protect your children's inheritance from a prior marriage. It can also protect your separate property if your spouse has debts. It can also minimize any divorce-related litigation if the marriage does end in divorce,” said Hadley.

Create a budget

Budgets are important money management tools. If you already live with your partner, you might have a budget that needs continuous management and revision. If you’re moving in after you get married, you will need to create one.

Creating a simple budget is easy using a budget spreadsheet that tallies income and expenses. First, put in your income; then, plug in expenses like rent, bills, savings and other financial goals. After that, you can see how much is left over for recreation or other optional expenses.

Remember that your financial picture may change once you’re married. For example, in many states you may no longer be eligible to receive alimony payments from your ex once you get remarried (laws vary from state to state). If you are moving in together, your rent and bill obligations may change. If you or your partner have children, their expenses will need to be considered.

Whether one person manages the money or both spouses have an active role, it’s a good idea for both of you to have access to the budget. Couples that share their finances are more prepared to weather financial emergencies, and are less likely to hide secret debts.

Lay the groundwork for transparency

Financial transparency can be beneficial for the success of a marriage. While finances are a sensitive topic for many, you and your spouse-to-be probably don’t want to be surprised by large debts or bad credit after the wedding.

“We all know that finances can be a huge source of tension in a relationship,” said Hadley. “Reduce the tension by talking openly and honestly about your past experiences with finances as well as what you want for your future together.”

Schedule a time to sit down with your partner and have a conversation (or series of conversations) about your finances. Here’s what you should discuss:

1. Spending habits

Letting your partner know how you spend money can help you fine-tune your budget. Discuss your spending habits honestly, like the way you prefer to manage your money and any issues you’ve had in the past.

If you had specific financial disputes or problems in a previous marriage, now is the time to bring them up and look for ways to avoid the same problems in your impending marriage.

2. Financial goals

It’s important to let your partner know your financial goals. These may include buying a home, having children, paying off debt, investing or traveling. Discuss your goals together and choose which ones you will prioritize. Getting on the same page now can help you avoid future disagreements.

It’s healthy to have similar and separate goals from your future spouse. For example, one partner may want to help a child from a previous relationship save for college. It’s important to prioritize your partner’s goals as much as your own.

Couples should create their financial plan together and focus on both short- and long-term goals, said Hadley. Progress on short-term goals can be reviewed on a monthly basis, while progress toward long-term goals can be checked annually.

Not sure what you should be focusing on? Consider hiring a financial planner, who can analyze your finances and help you establish a plan.

3. Assets and liabilities

Even if you end up keeping your finances separate, it is helpful for each spouse to know what assets and liabilities the other is bringing into the relationship. You and your partner should provide each other with a full accounting of your assets, income and liabilities. This will make it easier to adjust your budget, pay down debt and work toward financial goals.

It’s also helpful to know the state of each other’s credit. If you plan on jointly applying for credit cards, loans or other financial products, you should know how your partner appears to lenders. If one of you has poor credit, you can work on building it early on in your marriage.

Make sure to keep good records, including statements for all accounts you owned prior to your marriage, said Hadley. Don’t forget to include financial obligations that have carried over from previous relationships. For example, if you pay child support or alimony, your partner should have an idea of what that entails. Prior financial obligations affect your financial planning and budgeting as a couple, and you might even decide to open dedicated accounts for these expenses.

Combine or separate your finances

Deciding if you will keep your finances separate is an important step to take before getting married. If you are the sole breadwinner, the majority of expenses will probably fall to you. If you both earn a similar income, you may want to consider splitting expenses equally. Or, you could also proportionally split expenses based on your comparative incomes.

Here are some considerations when combining (or maintaining separation of) your finances.

1. Opening joint accounts

Sharing bank accounts and credit cards can be more convenient because you’ll both have access to money when they need it. You can use the joint account to split expenses and bills, track your spending and stay on budget.

Joint accounts can have some drawbacks if you’re not on the same page financially,for example, if your partner is an impulse buyer or has a lot of debt going into the marriage. You’ll want to discuss liability and accountability before opening a joint account if you don’t want to shoulder the burden of your spouses’ spending habits.

2. Maintaining separate accounts

Maintaining separate accounts lets each spouse have some financial autonomy. This is a good strategy if your partner isn’t great with money or you both want to have financial independence.

Keeping separate accounts can make splitting expenses more difficult, especially if you have to constantly move money around to pay bills. (one alternative could be for each spouse to have specific bills in their name). Another drawback is if your partner dies or is rendered unable to manage money, it will be more difficult for you to take control.

If secrecy and financial dishonesty was an issue for either of you in a previous marriage, remember that separate accounts could feed insecurities left over from those relationships. That doesn’t mean it’s the wrong approach for you, but it’s something to keep in mind.

3. Having joint & separate accounts

Some couples may prefer to share joint accounts for mutual expenses, like bills, and have separate accounts for their own spending, such as recreational purchases or old debts. This method will allow you to share the expenses that affect both of you while having separate accounts for the expenses that are solely yours.

This is a good approach if you are bringing a lot of your own expenses into a marriage like children, alimony or debt.

Create or update your estate plan

Estate plans generally come in the form of a will or trust, and they determine what happens to your assets, finances and children when you die. If you pass away without an estate plan, these decisions will be made during the probate process, in which a probate court determines what happens, regardless of what your wishes may have been.

Creating an estate plan can help to avoid interfamilial conflicts or drawn out court proceedings. This process will also ask you to name an executor of your estate, who will make sure your estate plan is properly executed.

If you already have a will or trust, you may need to make some adjustments for your second marriage, especially if your ex-spouse is the executor. This can help ensure your future spouse receives the assets you wish, and it can also help protect assets you wish to be distributed to your children or other individuals. It’s a good idea to consult an estate planning attorney to see if you need to make any changes.

Update your insurance

Similar to your estate plan, you want to update your insurance so it reflects your current needs. For example, if you were previously covered by your ex, you’ll need to get a new plan or go under your future spouse’s coverage.

1. Life insurance

The most convenient life insurance option is a separate term life insurance policy for each spouse, with each of you naming each other as the beneficiary. Separate policies make sense when you’re only insuring one person per policy, or you want to avoid the caveats of a joint policy.

Joint policies, in which both individuals are covered under the same policy, are less common but are more affordable in some scenarios. They can be more expensive if one spouse has health issues. They can also take longer to pay out and they’re difficult to split up in a divorce.

When it comes to coverage, a good rule of thumb is to shoot for around 10 to 15 times your income, but your actual needs may vary.

Remember that the act of getting divorced did not automatically remove your ex as a beneficiary for your life insurance. You will want to remove them — unless you must leave them on as a condition of your divorce, or you want to name them as a beneficiary so they can care for children you have together. The process for updating beneficiaries varies between carriers, so check your policy.

2. Health insurance

You may want to bring your spouse onto your health insurance plan after you get married, or hop onto their plan. Before you get married, evaluate each individual’s plan to see what makes sense in terms of coverage and cost.
Many plans allow you to add dependent stepchildren to receive coverage. Requirements and enrollment periods differ, so it’s crucial to understand the options that are available. Planning this out now will help you move more smoothly through the process.

Unless the divorce settlement allows for continued coverage, spouses who were covered under their ex’s health insurance will have to find a new plan. You may be able to keep your coverage for up to 36 months under COBRA, find a health plan on your own or get on your employer’s health plan.
Getting remarried involves a lot of planning, and it’s tempting to postpone big financial discussions until after you tie the knot. But the earlier you have these conversations with your partner, the better prepared you’ll be to work toward mutual goals and avoid conflicts or misunderstandings. Laying a strong financial foundation now can go a long way toward building a successful marriage.

Recommended reading

How do other couples manage their money? Read our survey.

Should you get a prenup? Here’s a guide.

Here’s the difference between a trust and a will.

Here’s how much life insurance you need.

Image: Sandy Milar