Financial advice for a second marriage
Discussing a prenup is the first tip for second marriages.
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Some things are sweeter the second time around. You’ve met the love of your life and you’re set to be married again! But there are all kinds of financial affairs, some of them complicated, that you’ll need to attend to as you enter your second marriage.
Have a wide-ranging talk about money
With a second marriage, you may be older and wiser about your financial habits. Tell your new spouse what you’ve learned, and be sure to share details. Talk about your financial future together, too.
“Blended family finance can be complicated because of the unique financial situation each spouse may bring to the relationship,” says Gabrielle Clemens, a financial advisor at RBC Wealth Management in Boston, Massachusetts. “Share with your new spouse your income, debt, assets, liabilities, and expectations around your current financial obligations, commitments, [and] expectations.”
Does one spouse make more money than the other? It can make for an awkward conversation. But it doesn’t have to be. “Being honest and transparent can improve the likelihood of success that this union will last,” says Clemens.
Disclose prior financial obligations
By the time you reach your second marriage, you may have a number of financial commitments from your previous marriage, particularly if you have children. Let your new spouse know about your situation.
“Full disclosure and transparency about what debt [and] financial obligations and commitments they are both bringing into the marriage is critical for the relationship to succeed,” Clemens says.
Consider a prenuptial (or postnuptial) agreement
If you have a lot of assets and investments, you may wish to get a prenuptial agreement before your second marriage—or a postnuptial agreement if you’ve already walked down the aisle (again). With such a document, you and your spouse decide the financial terms of a split if you should ever get a divorce. “It’s like insurance. You hope you don’t use it,” says Echo Huang, founder of Echo Wealth Management in Plymouth, Minnesota. “Both parties agree [on] how to divide assets [in the event that they decide to separate].”
But getting such a legal document isn’t only about predicting your relationship’s demise—which of course you hope won’t happen. When two parties enter into a second marriage, they likely bring in a different set of finances and financial issues than a younger couple entering a first marriage might. You can use a prenup or postnup to decide how you will be merging your finances during a marriage. “Why not decide for yourselves what you two think is fair at a time when your relationship is at a peak affection level?” says Kaylin Dillon of Kaylin Dillon Financial Planning in Lawrence, Kansas.
Put your financial plan into writing
It’s a brand-new marriage, and that means it’s time for a new financial plan. What are your goals as a couple? How about goals for your children—both from previous relationships and any you plan to have together? A new home? Private school for the kids? Even if you don’t go for a legal document, put it to paper by writing out a plan.
“A written plan can always be modified to reflect a change in goals, but with a blended family, it helps make goals clear, concise, and agreed upon by all involved,” Clemens says. “The plan should be updated periodically and whenever there is a big financial event such as college, weddings, and large purchases.”
Keep separate accounts and one joint account
Combining finances can be complicated when there are children from previous marriages to consider or when a spouse has far greater financial resources than the other. For this reason, keeping accounts mostly separated makes the most sense.
“It can be effective for couples in a second marriage to have separate accounts to manage each person’s income and individual expenses, and one joint account that each contributes to for joint expenses,” Clemens says.
Nervous about sharing a joint account after flying solo for years? Look at it this way. If you’re already saving for a shared goal such as a new home or new car, it may make a lot of sense to share a joint account.
Review your estate plan
Getting your estate plan in order takes a bit of time but it also saves you some cash. So don’t delay this important planning.
Would you like children from a first marriage to remain beneficiaries in your insurance polices and your will? Discuss this matter with your new spouse. “Estate planning is critical to a second marriage, especially if there are children from the first marriages,” Clemens says.
Naming your new spouse as a beneficiary to a life insurance policy is a good strategy. “Life insurance can be an effective way to provide for a second spouse in the event of death, without reducing the assets intended to be left to your children,” says Clemens.
Power of attorney should also be updated with a new spouse in mind. This legal designation gives a person the ability to make decisions regarding another person’s finances or medical care, should they be unable to do so.
Whatever you decide, meet with an estate lawyer to discuss how to put each of your wishes in legal documents to reduce confusion and issues for your loved ones later.
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