Financial Planning for Remarriage
By Barbara O’Neill, Ph.D., CFP®, Rutgers Cooperative Extension, [email protected] Personal Financial Management (PFM) program staff often counsel military families about the financial implications of lifestyle transitions. This includes the decision by service members to remarry after the death of a spouse or a divorce. About three-quarters of divorced Americans eventually remarry.Not only do they merge their financial lives, as all married couples do, but remarried couples also bring with them financial “issues” from their previous marriage(s) such as unpaid debts and payments to, or income from, an ex-spouse for alimony and/or child support obligations. Estate planning is also complicated by remarriage (e.g., providing for both a new spouse and children from a prior marriage).Spouses who previously pooled income with an ex-spouse in a joint account and had money taken without their permission may prefer to keep all their accounts separate the second time around. In addition, a new spouse may feel uncomfortable maintaining a joint account out of which payments are made to an ex-spouse. Money can also get tied up with emotions in stepfamilies such as spending to win the affection of children.Image via Pixabay.com/CC0Below are six recommendations to share with service members who are remarrying:Consider a Prenuptial Agreement (a.k.a., prenup)- Interview at least three family law attorneys to prepare a plan. Define assets that each partner brings to the marriage, how they will be titled, how expenses and existing debts will be repaid, and how property will be distributed in the event of death or divorce.Develop a Spending Plan (a.k.a., budget)- Include anticipated income and expenses and decide who will pay what bills. It is generally fairer to all involved to pay current expenses (not those related to a prior marriage) in proportion to each partner’s contribution to total household income.Separate the Past From the Present– Accept the fact that support payments to an ex-spouse are an ongoing “fixed expense.” Remarried couples may prefer paying support obligations and other expenses for children with their personal funds so they are not constantly “visible” to their new spouse.Treat Children Fairly- Develop uniform policies for all children living at home regarding allowances, spending money, payment for services, and equipment purchases (e.g., cell phone). Otherwise, children and stepchildren, alike, are likely to cry “unfair” about differences in the parents’ money management practices.Consider a QTIP trust- Create this legal document to leave income to a spouse for life but distribute assets to children from a prior marriage. Another option is to establish an irrevocable trust funded with life insurance. When a parent dies, the trust’s life insurance policy provides an immediate death benefit to children from a first marriage rather than waiting for the stepparent’s death as with a QTIP trust.Separate Parenting Issues from Financial Issues-Do not deny visitation to a non-custodial parent if a support payment is late or does not arrive. While custodial parents have every right to be angry, they are using their child as a tool to punish the other parent. In addition, research indicates that the less frequently a parent has contact with their children, the more likely they are to withhold support payments. Communication about financial matters is important in all marriages but especially in remarriages which come with more financial complications and where spouses may have developed long-standing money management practices. Otherwise, stresses can build and relationships become strained. The University of Florida Extension publication So You Want to Remarry? has additional information about financial issues related to remarriage.