Family Wealth Planning for Newly (Re)married Couples

Marriage is wonderful in a lot of ways…

After saying “I do,” you and your dearly beloved get to enjoy years of love and friendship, a blending of families, and the chance to add another wacky aunt or uncle to your extended family. You also get access to several upsides in the legal, tax and Social Security realms.

At the same time, getting married also means you become a single economic unit. Your partner’s financial wins become your wins; similarly, their financial flops are also yours to share. So, marriage also means you’ll need to find new ways of talking about money and managing your finances.

Though it’s not always clear-cut how best to navigate through these changes, planning ahead will help you build a solid financial foundation for your relationship. After all, finances will affect all aspects of your life together! Whether this is your first or third marriage, it’s smart to approach the financial side of your marriage like a business decision.

We’ve compiled some key points on how you and your partner can merge your financial plans. Let’s dive in.

Before tying the knot

Two keys to managing money successfully in marriage are communication and compromise. From the outset, be open with each other and talk about your money dreams and concerns. You and your spouse will not share identical views on money, but having open and honest conversations about your goals and financial situations puts you on the right track.

Start the discussion by going over basic information and ground rules. 

What is the credit situation?

How much debt do you have?

How much do you have saved for retirement?

How do you like to spend your “fun money”?

What is the maximum we can spend before needing to consult the other person?

What are your views on separate versus joint accounts?

How will we divide our expenses?

What is our savings strategy?

Marriage involves merging your life goals, and you’ll also need to protect your own assets. While planning your family wealth strategy, don’t forget to meet with your Fiduciary Financial Advisor, who can help you reconcile any divergent perspectives on spending and saving.

Especially if both partners are coming into the marriage with substantial assets, consider a prenuptial agreement. It should include what assets each partner owned before marriage, what should happen to them going forward, and how to take care of children from previous relationships. Remember that a prenup can be amended in the future—if circumstances change and you want to override it at some point, you can.

If you’re supporting a sibling or aging parents and want to leave them with an inheritance, make sure to meet with an estate attorney. Make sure you have your wishes spelled out on paper and accounted for through a will and trust.

Connect With a Skilled Fiduciary Financial Advisor

What is fair in a second marriage and estate planning?

We can help you learn about the implications of a second marriage and what it might mean for your portfolio.

Get on the same page about money

Disagreements about money are to be expected. How you handle those disagreements can make all the difference in the success of your marriage. Once you understand your individual financial views, you’ll have an easier time building a shared strategy to achieve your goals.

Start by looking for big commonalities. What are your overlapping goals and aspirations? It’s likely that you can agree on top priorities like paying off the mortgage, taking a fun summer vacation, and securing a comfortable retirement. 

Then, zoom in a little further. Where can you find common ground when it comes to spending and saving? Work to align your cash flow and other elements of your financial plan, with your goals and aspirations.

The first few money conversations may feel awkward, but keep at it. Approach these talks with an open mind, as money philosophies are as nuanced as the people who hold them. Share stories about what money means to you, why you use it the way you do, and what kind of legacy you want to leave. The better you understand each other’s money mindset, the easier the conversations will become.

Merging your financial plans

Your prenuptial agreement addresses the “what if” questions of the future. Your family wealth plan addresses your day-to-day financial life as a married couple.

Take some time to meet with your Fiduciary Financial Advisor to review the various parts of your shared financial life:

step 1

Individual assets

step 2

Combined cash flow

step 3

Investment accounts

You and your spouse probably have different investing styles, so it might be best to keep investment accounts separate. Of course, you can spend the money to benefit both of you, such as shared vacations or buying property.

step 4

Deciding how to integrate your finances

From here, you and your spouse will need to answer questions like:

• Will we combine bank accounts? 
• Do you want to keep separate accounts in “yours,” “mine,” and “ours” buckets to pay the bills but also keep each spouse’s spending their own? 
• How will we split expenses on a proportional basis?
• How will income flow into these and other accounts?

Your Financial Advisor will help you look at all your accounts together during each annual financial review.

Remember to sign a financial durable power of attorney to allow the other spouse access to retirement accounts. This will come in handy in certain situations, such as one spouse’s assets are illiquid.

Planning for healthcare & healthcare costs

Healthcare costs are a huge and growing aspect of your financial life, particularly if you’re getting married later in life. Healthcare spending occurs over many years and decades, which means it needs to be factored into your cashflow.

Health plan

A new marriage is one of the life events that allow you to change your health insurance election without waiting for the open enrollment period, so use this time wisely.

If both of you work and are covered by a health plan through an employer, take a look at which plan sounds most favorable. For example, does your spouse’s plan offer lower premiums or a wider choice of doctors? Does one plan have other benefits that the other plan doesn’t?

Long-term care

Decide how you’ll pay for long-term care, whether it’s in each individual’s assets or joint accounts.

Advance care planning

Discuss healthcare directives with your spouse, especially if you have adult children who want to be involved in these decisions. Sign a HIPAA (Health Insurance Portability and Accountability Act) release so that your health information can be shared.

Retirement planning

Once you have your health and life insurance benefits squared away, you’ll also want to consider planning for retirement. Take advantage of the many different retirement accounts available to help your tax situation.

• Your employer’s 401(k) and 403(b) plan
• Traditional and Roth Individual Retirement Accounts (IRAs)
• Spousal IRA for non-earning spouses

Estate planning

Now that you’re married, you’ll need to make important decisions about estate planning.

Life insurance

Life insurance protects your family from sudden financial devastation when you’re no longer here. 

Moreover, when owned by a properly structured irrevocable trust, the death benefit from your life insurance policy can supply liquidity to offset federal or state wealth transfer taxes. It can also prevent a forced sale by purchasing assets from your estate, or by lending money to the estate.

Beneficiaries

Review your beneficiaries in the context of your new marriage. Look at your beneficiaries on existing retirement plans, pensions, IRAs, and any other assets.

• Do you want to name your children, each other, or other relatives as the beneficiary of your accounts?
• Do you want to leave a legacy to your kids and grandkids? 
• Do you wish to fund a charity?
• Would you rather spend your money now so your kids learn to work hard and manage their own money well?

Depending on your state, you might have restrictions on who you can name as your beneficiary. Remember to consult legal counsel if you are choosing someone other than your spouse or children.

Annuities

For some, annuities are a great benefit to your estate planning toolbox. Annuities avoid probate and can be used for wealth transfer when set up to fund life insurance. Death benefit annuities offer a minimum rate of return to heirs, while charitable gift annuities create tax savings and income while helping charity.

We Can Help

Even if you decide not to merge all your money, you’ll need to mesh your financial plans to avoid future conflict with each other and among your children.

If you’d like to inquire about our Family Wealth Management services, please fill out the form below and we’ll get back to you shortly. We look forward to hearing from you.