Financial Fitness

The Finances of Remarrying: 6 Considerations

Concerned about a joint budget or other finances of remarrying? Make time to discuss money with your partner.

by Michelle Crouch - July 03, 2017

Money is a tricky topic in any marriage. However, the finances of remarrying are even more complex. Both parties may be coming into the union with their own assets, debts, and spending and saving habits — and often children from previous marriages.

More Americans than ever are entering second marriages, according to a recent analysis from the Pew Research Center. Four in 10 new marriages include at least one partner who has been married before, the Pew Center found.

“Getting remarried gives you another chance to get it right, but you need to make sure you address the issues that may have caused your first relationship to fail,” says Scott Smith, a Wealth Strategist with Wells Fargo Advisors. This advice certainly holds true when it comes to money, as financial incompatibility is one of the most common factors that drive couples apart.

If you’re about to walk down the aisle a second time and thinking about the finances of remarrying, Smith recommends taking the following steps to get your new life off on the right financial footing:

1. Put all of your financial cards on the table

While the process may seem a little awkward, it’s important to share a full accounting of your assets and liabilities. Partners should share with each other documents such as tax returns, pay stubs, and bank and investment account statements. Discuss any financial obligations you have to your ex-spouse, children, or to your extended family. Smith even recommends that you each run a credit report and share it with the other. “I call this the discovery phase,” Smith says. “You each want to know what you are getting into financially before you walk down the aisle. That’s especially important if you’re planning to buy a house together or make other major purchases requiring credit considerations.”

2. Consider a prenup

It may seem unromantic, but Smith suggests that remarrying couples should consider whether a prenuptial agreement would be appropriate. Prenups don’t just spell out how assets should be split if the marriage fails; they also come into play if one of you dies. A prenup is especially advisable if you are bringing a lot of wealth or assets into the marriage or if you have children from a previous marriage you want to protect, Smith says.

3. Discuss your financial goals and philosophies

Are you a spender or a saver? Do you want to be able to support your aging parents as they get older? At what age do you hope to retire? Do you want to have children together? These are among the critical questions that play into the finances of remarrying. Smith says that before you tie the knot a second time, it’s important to examine what money issues caused stress in your first marriage and what steps can you take to avoid them in the future.

According to Pew Research Center, four in 10 new marriages include at least one partner who has been married before.

4. Decide who will pay for what

Discuss whether you are going to pool your assets and have a joint account, keep your assets totally separate, or have separate accounts as well as a joint account to which you both contribute. There’s no right or wrong method, Smith says, as long as you both are comfortable with it. Keep in mind that if you decide to keep your premarital property separate, it’s important not to co-mingle it with property that you acquire during your marriage. Be careful, for example, about how you handle dividends on equities that you owned before the marriage. In some states, earnings on separate property earned during the marriage are considered marital property. While the stock itself can stay in your original account, the dividends are technically being accrued by both of you and should be segregated in a separate account

5. Change your account beneficiaries

Many people forget to change their beneficiary designations after they divorce. In most states, that means your divorced spouse may inherit certain assets if he or she is still named as beneficiary on those accounts. Now that you’re remarrying, take the time to update the beneficiaries of your retirement plans, annuities contracts, investment accounts, and insurance policies. If you want specific benefits to go to your children rather than your new spouse, you may need to get a spousal waiver.

6. See your Financial Advisor

Your Financial Advisor can help the two of you work through the finances of remarriage. Smith recommends working with your advisor to create a financial strategy together. “Going through that process will highlight your attitudes about spending, saving, and investing — and give you a better sense of your similarities and differences,” he says. “It will also help you agree on a joint strategy for your financial future together.”

Michelle Crouch writes about consumer finance, parenting, and more from her home in Charlotte, North Carolina. Her work has appeared in Reader's Digest, Parents magazine, and The New York Times.

Image by iStock

Additional Resources

The end of a marriage is never easy. But it is possible to have a financially healthy divorce so you’re able to move forward with your life in a positive way.