Obligations to previous partners and children, along with financial habits and biases, complicate the decision
A couple’s decision to intermingle finances or keep things separate is a crucial one — and for those who’ve been married before, it’s especially complicated.
Aside from tending to be older than first-timers, one or both parties can have a lot more baggage. They may have significant assets, as well as financial obligations from previous marriages. Entrenched financial attitudes and positive or negative associations with money may also morph into problems down the road.
As noted in the Wall Street Journal, remarrying couples should begin with an honest conversation about their individual incomes, assets, and obligations. “Psychologically, it can be hard since many divorces are contentious and here you are laying out all your financials on the table,” said Joanne Jensen, managing director and private banker at Deutsche Bank Wealth Management.
Ideally, these preliminary steps toward a joint financial plan should occur at least several months before the wedding. Both individuals should be ready with a rundown of bank accounts, investment and retirement accounts, homes, businesses, rental properties, and other significant assets. Incomes, debts, daily expenses should also be laid bare to help avoid future conflict.
Couples should also discuss financial obligations to ex-spouses or children, as well as other terms from divorce decrees; other future potential expenses involving children, such as tuition and extracurricular activities, are also important. Conversations to work out how such costs will be handled can be emotionally charged, particularly for those with contrasting views.
“A lot of couples nowadays don’t want to combine everything,” Marilyn Timbers, owner of Timbers Financial Strategies, told the Journal. She noted that keeping things separate isn’t inherently wrong, as long as each party keeps no secrets and they share a common financial goal.
From there, they can draw boundaries around less dramatic decisions, including who will pay for which household expenses, whether they will merge accounts or open new joint accounts, and whether one spouse will add the other to an account. The last item is especially important, said Glen Smith, financial planner and managing partner of Glen D. Smith & Associates, as it opens the door for the new spouse to withdraw substantial amounts or misuse funds.
End-of-life issues are especially critical for remarried couples, as they tend to be older. It’s useful to ask such clients how they’d want their new spouse to be taken care of should they pass away. Estate-planning preferences — whether they want to give their wealth to their current wife or husband, their children from a previous marriage, or both — should also be pinned down.
Decisions involving one’s estate should happen before couples combine their assets, Smith said; they must also weigh the possibility that they’ll divorce, especially since the process of intermingling assets can be tough to undo.
