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How Late-Life Marriages and Remarriages
Require Unique Financial Planning
As the holidays approach, plenty of couples think about
marriage. That includes older couples with kids, accumulated
assets and debts and previous marriages behind them.
That's why marriages for older individuals require a specific
sort of planning. For couples making another effort at marriage,
a prenuptial agreement can either set the groundwork for a new
and trusting relationship or reveal that money issues may
prevent the marriage from working well.
It's actually not the agreement by itself that makes the
difference — it's the way the couple gets the agreement down on
paper. When two parties sit down to formalize a prenuptial
agreement with their respective mediators or attorneys, it
requires both sides to make full disclosure of their current
financial situation and long-term money goals.
Prenuptial agreements can be considerably more complex for
couples making a repeat trip down the aisle. Money issues are
not just a matter of full disclosure between two people — in
remarriage, they can affect a much wider audience including
aging parents, siblings and children and ex-spouses from
previous marriages. In some cases, there are sizable business
and personal assets gathered before the upcoming wedding day
that must be protected.
It is always wise to consult a financial advisor such as a
CERTIFIED FINANCIAL PLANNER ™ professional to set the ground
rules for this process, though legal documents that hold up in
court generally need review by respective family law and estate
attorneys.
Here are the primary issues any remarrying couple should
discuss ahead of a formal engagement:
Families first. Blended families bring their own
financial complications. Indeed, if couples are bringing
children from previous marriages into a blended family, it's
necessary to establish not only how they will be supported and
educated, but also what percentage of the family assets they
will be entitled to in case their biological parent dies. There
may be alimony and other support arrangements already in place
for ex-spouses and children from earlier marriages as well as
elderly parents to support. All of these financial requirements
need to be understood and spelled out beforehand.
Is there debt? And if so, how much? The first money
conversation should take place at a table with both sides
showing their credit reports, savings, investments and debt
figures — every dime. Both should start the process of talking
about how that debt should be paid off — by the person who
accrued it, or by both potential spouses. Couples also need to
decide how they will handle debt going forward — jointly or
separately.
What about investments? If so, how will they be
handled once the couple is married? Will these investments be
held after the marriage in joint tenancy? Are some of the
investments promised to children, ex-spouses or other family
members? From a tax or estate perspective, does it make sense to
do anything specific with those assets before the wedding? And
after the wedding — assuming debt is being dealt with — how will
you maximize those investments?
What about company assets? If one or both spouses run
their own companies or partnerships, it's a huge planning
priority. That's particularly true if other family members work
for their respective companies. Depending on the size and
complexity of the operation, some advisors might encourage
couples to go through a formal valuation process of those assets
to establish a base of wealth going into the marriage. A prenup
could spell out who will get future percentages of those assets
if the couple splits — this is particularly necessary if the
goal is to keep the company in the hands of the founding family.
Handling daily expenses. This is a universal question
in any marriage, the first or the sixth. Couples need to agree
on how they'll share accounts and pay bills. The most common
option is to create one joint account. Others work with three
accounts — one joint and then one for each individual.
What about insurance? Life, health, home, and
disability — all coverage that singles hold separately needs to
be reviewed and consolidated to make sure the couples and their
families have adequate coverage after the wedding.
What about our estates? Blended families with means
produce a surprisingly complex estate picture. Engaged couples
need to begin addressing this need before the wedding. A
qualified estate attorney who understands the variety of estate
issues affecting the assets, business issues and philanthropic
commitments of blended families is a particularly good
investment and can work with financial planners, tax attorneys
and accountants to create an estate plan for the couple that
makes sense and minimizes conflict among heirs.
What about retirement? Retirement discussions go
beyond money. Couples should decide how they want to live in
retirement, whether they'll continue to work and what will
happen if one or both get sick. This is a particularly important
discussion if one spouse is significantly older than the other
and may retire years ahead. There needs to be a close look at
what retirement assets have been accumulated by both parties and
how they'll be shared during the marriage and after the death of
one or both of the spouses.
What about our tax status? It makes sense for couples
to consider their tax status before they marry, particularly if
there are sizable business or personal assets being brought into
the marriage or past tax liabilities. In any event, remarrying
couples should involve a tax expert in all pre-marital financial
planning.
November 2009 — This column is produced by the Financial
Planning Association, the membership organization for the
financial planning community, and is provided by Don McCarty of
Financial Decision Partners, a local member of the FPA.
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