Embarking on a second marriage presents unique money management concerns. Combining two households and two sets of finances can be tricky waters to navigate. If your first marriage fell apart over money matters, you probably crave more security the second time around. If you or your new spouse bring children into the marriage, you likely have concerns about protecting their inheritance. A prenuptial agreement and a carefully crafted estate plan can give both partners peace of mind.
It might not be the most romantic subject in the world, but a prenuptial -- sometimes called antenuptial -- agreement is a pre-marriage contract that spells out how assets and debts will be divided if the marriage turns sour. To be legally binding, both sides must fully disclose their finances. The agreement should also be reviewed well in advance of the wedding, since contracts signed shortly before the big day might be thrown out if allegations of coercion or duress spring up. A prenup must also be signed by both spouses and properly witnessed.
Wills and Beneficiaries
Most people don't like to think about death. If you have children from a first marriage, however, taking care of your estate plan now could save your offspring a lot of hassle when you're gone. Contract-based assets like life insurance policies and retirement plans allow you to name beneficiaries. Designating your kids as beneficiaries guarantees they will receive the money you intended. Property you own jointly with your new spouse will pass directly to her -- not your kids -- when you die, so a simple will might not be enough. If you own significant assets, a trust might be worth exploring.
Sometimes it's possible to have your cake and eat it, too. A qualified terminable interest property trust can be a good solution if you want to provide for both a second spouse and children from a past marriage -- all while saving on estate taxes. In a QTIP trust, the surviving spouse gets the trust income for the rest of her life. When she dies, the children inherit the trust assets, essentially stepping into the stepmother's shoes. As a bonus, estate taxes are deferred until the second spouse passes away.
Elective Share Considerations
It might be tempting to cut your spouse out of your will and simply leave everything to your children. State laws prevent this, however, by giving widows the right to get first crack at the deceased partner's assets. Elective share legislation protects disinherited surviving spouses by allowing them to bypass other heirs and shoot straight to the top of the beneficiary list. Percentages vary by state. In New Jersey and Pennsylvania, for example, the elective share is one-third of the decedent's total assets.
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