It's Retirement Accounts: Understanding the Implications
Discussing personal finances is important for any couple preparing for marriage. However, this topic can be more complicated for those who remarry. Remarrying later in life can bring with it a unique set of financial challenges, such as existing debt, obligations to children from previous marriages, and different financial goals and priorities. Therefore, it's crucial to have open and honest discussions about finances with your future spouse to ensure that both parties are on the same page.
When remarrying later in life, it's important to recognize that each partner comes into the marriage with their own financial history, assets, and obligations. This can make it more complicated to manage finances and make financial decisions as a couple. Therefore, it's crucial to have open and honest discussions about money with your future spouse to ensure that both parties are aware of each other's financial situation and to establish a plan for managing finances together.
Here are eight important personal finance considerations you should make if you’re remarrying later in life:
1. Combining Finances
When considering how to manage money as a couple, one of the first things to discuss is whether to combine finances or keep them separate. This decision will depend on your individual financial situation and your future financial goals as a couple. Discuss with your partner what would work best and whether you'll establish a shared account, keep things separate, or use a combination of the two. Also, consider who will have access to which accounts, how bills will be paid, and how expenses will be divided.
2. Clearing Up Financial History
Have an open and honest discussion about each other's financial history. This includes any outstanding debts, such as credit card debt, mortgages, student loans, or medical expenses. Prior financial responsibilities can impact both of you, so it's crucial to take steps to address them before tying the knot.
One way to address any financial issues before marriage is to create a plan to pay off any outstanding debts. This can help to ensure that you both start your new life together on solid financial footing. For example, you may decide to pay off high-interest debt first or to consolidate debt into a single loan with a lower interest rate.
Another important step is to establish a budget and determine how you will manage your finances as a couple. This includes deciding how to divide expenses, whether to combine finances or keep them separate and how to save for future goals.
Additionally, it's important to be clear about any financial obligations you may have to children from previous marriages or other dependents. This includes child support payments, alimony, or any other financial commitments.
By being transparent about your financial situation and working together to address any outstanding debts or financial obligations, you can build a strong foundation for your new life together. This will help to ensure that you are both on the same page when it comes to managing your finances as a couple and achieving your future financial goals.
3. Estate Planning: Establishing Your Expectations
It's important to discuss and establish your expectations ahead of time regarding whether estate documents will be updated. Will you be updating your will, living will, power of attorney, or healthcare powers to reflect the new marriage? If you have children, it's important to include them in this process and communicate your strategy to them.
4. Retirement Accounts: Understanding the Implications
When remarrying later in life, it's important to consider how your new marriage will impact each other's retirement accounts. This includes not only updating beneficiaries but also evaluating whether to keep separate accounts or combine them.
One of the advantages of keeping separate accounts is that it can help to protect each other's assets, particularly if you have children from previous marriages. By keeping your accounts separate, you can ensure that your retirement savings go to your intended beneficiaries if something were to happen to you.
However, if you do decide to combine your retirement accounts, it's important to understand how this will impact your finances in the long run. For example, if one partner has significantly more savings than the other, combining accounts could result in the lower-earning partner losing out on potential retirement income. In this case, it may be more appropriate to keep separate accounts and contribute to a joint account for shared expenses. It's important to review and update beneficiaries on retirement accounts and other financial assets, such as life insurance policies and investment accounts. This ensures that your assets are distributed according to your wishes and that your new spouse and any children from previous marriages are provided for.
5. Tax Implications of Remarrying Later in Life
When remarrying later in life, it's important to be aware of any tax implications that may arise, particularly if one or both partners have a complex financial situation. For example, if one partner has significant investment income or a large estate, it could impact the tax liability of the other partner.
Additionally, if one or both partners have children from previous marriages, there may be tax implications related to inheritance and estate planning. Understanding these tax implications before marriage can help you and your new spouse be better prepared and make informed financial decisions.
It's important to consult with legal and tax professionals as your marriage plans progress to ensure that you fully understand the tax implications of your unique situation. They can provide valuable insights and advice to help you make informed decisions and minimize your tax liability.
6. Reviewing Your Insurance Coverage
Review your current insurance coverage and evaluate whether any changes are necessary. This includes health insurance, life insurance, and any other insurance policies you may have.
For example, if one partner has better health insurance coverage than the other, it may be beneficial to switch to a joint plan to save on costs. Similarly, if one partner has dependents from a previous marriage, it may be necessary to update life insurance policies to ensure that they are adequately provided for.
Additionally, if you are planning to purchase a home or other major assets together, it may be necessary to adjust your homeowner's insurance or auto insurance coverage accordingly.
To ensure that you have the right insurance coverage in place for your new marriage, it's important to check in with your insurance professional and update them on your pending marriage. They can provide guidance on the types of coverage you may need and help you select policies that fit your budget and individual needs.
7. Considering a Prenuptial Agreement
Though often viewed negatively, a prenuptial agreement can help structure how you and your spouse will manage your assets. One study showed that 42% of Americans support signing a prenup before marriage.1
8. Working with A Financial Advisor
If you're remarrying later in life, it's important to approach your financial planning from a holistic perspective. This means taking into account not only your individual financial situation but also your new spouse's financial situation, any dependents you may have, and your shared financial goals.
I specialize in helping couples navigate the financial implications of remarrying later in life. My team of experts can work with your existing advisors, such as your attorney and accountant, to create a seamless financial planning process that addresses all your needs and concerns.
I understand that every situation is unique, which is why I take a personalized approach to financial planning. I can help you evaluate your current financial situation, identify any potential roadblocks or risks, and create a comprehensive plan to achieve your future financial goals as a couple.
So if you're looking for guidance and support as you navigate the financial complexities of remarrying later in life, give my office a call. We're here to help you build a secure and successful future together.
1 theharrispoll.com, July 20, 2022