Impact of Remarriage on Wealth Creation and Debt
Second marriages have implications generally not seen the first time around. Since financial arguments are key factors in divorce, , addressing sensitive financial matters before marriage can help build a more solid foundation to a happier union.
First marriages often occur when you have little in the way of assets and debts. Higher levels of assets need to be protected and higher levels of debt can send red flags about spending concerns. Children from a previous marriage can also create a more complicated financial picture for the new family unit. These factors can bring you closer together as you build a partnership, or tear you apart if it leads to fights.
Five elements you should address before saying “I Do” include the following:
Complete financial assessment should be shared. These include discussion about assets and debts along with credit reports and spending habits. What are long term financial goals? If one party has debts, is the other willing to make lifestyle adjustments to pay them off? Do you want a prenuptial agreement? How will assets be titled and who will be responsible for what bills? The more open you are with each other the better you can solve financial problems and build a strong future together with a common goal.
Impact of marriage on social security, pensions and alimony. Those who were married over a decade qualify to claim social security on the ex-spouses record, unless you remarry. A marriage may also eliminate widowed social security payments if you are under 60. Pensions and alimony may also be affected by new nuptials, which can impact the family budget significantly.
Healthcare costs are a bigger factor as you age and become a larger concern if you are over 50. Many states have laws in place that impose financial liability to both spouses for either party’s healthcare expenses. This may deplete retirement savings and investments leaving the surviving spouse with heavy debts and fewer assets. Long term care and life insurance can be a way to mitigate this risk.
Child support and financial aid may be an issue for those with minor or college aged children. Those receiving child support are generally not impacted by the additional spouse’s income. If you are paying child support, then both parties need to be on the same page with regard to the costs of raising the children and what financial support is being provided. Financial aid will include all household incomes for the custodial parent.
Estate Planning can be particularly difficult when children from a previous marriage are present. Titling of assets becomes critical along with trust accounts and/or an updated will. While a divorce does not generally invalidate a will, a remarriage does. If you both own homes and you place deeds jointly with right of survivorship, then the last surviving spouse will inherit both homes, leaving assets to their children rather than yours. Keeping homes in individual names might be the solution, although this may leave the surviving spouse without a place to live. These issues should be addressed early with the help of an estate planning professional.
A new union is the merging of hearts, assets and debts. While it may not be very romantic to address financial concerns, it will prevent financial arguments down the road. Look for red flags that might jeopardize your financial future, along with a willingness to find better solutions. Paying down debt and building your retirement may need to be adjusted based on the new joint financial position.