What Changes Financially When You Get Remarried?

You're listening to Mr. Stillman's Opus. Glad to have you on the show today as we go into part two of a three-part discussion we're having here on the podcast. A major life event for you. It's the marriage, remarriage, divorce, the relationship portion of your life. And these big events obviously call for some big decisions and some big conversations that you need to be having with your loved one. And we already covered marriage the last time up with some really good insight from John on some things you need to be thinking about, communication you need to be having with your spouse or partner when you join in that lovely union. But now, John, we shift gears to remarriage. So I assume this is a similar, a lot of similar conversations you have, but I guess there are some different things because oftentimes here, not only the first time through you're obviously joining bank accounts, but now you're a little bit later in life. In most cases, you've got more assets, more things to consider, right?

Yeah. So we talked about in the last episode about the combining of finances when you get married and having a joint account and everything like that. This is inevitably going to be more difficult when it's the second marriage for a couple of reasons. One, like you said, yes, you're further along in life. You're kind of more ensconced in your habits and behaviors and you're just more established. Like if you're getting married in your 20s, you probably weren't that organized from a financial standpoint.

You've only been living life in the real world for a few years at that point. If you're getting remarried in your 40s or 50s, you're pretty set in your ways. And so combining households, combining financial households can be a challenge. So we do have to really communicate a lot and go into the marriage understanding like what is going to work for both parties. Well, John is a chartered retirement planning counselor at Rosewood Wealth Management. You can always follow up with anything we talk about today.

You can call our text 800-545-2991. So with remarriage, let's start where we started on our first conversation. That's combining finances.

And again, you have a lot more you're looking at here. Is it more common to keep things separate here, John, or are you having a lot of the similar, hey, let's put this all together and work from there? I would say it's definitely more common in second marriages for finances to be separate, at least early on for sure. And a lot of that, I think, is because almost inevitably one spouse or the other is coming out of a previous marriage where money was some issue of contention. Now it's maybe not the reason that the previous marriage ended, but it was at least a contentious matter in the previous marriage. So there's some baggage there.

So the idea of immediately combining finances and a new marriage right off the bat is tough for people. I get that. So again, you just want to be open about what the issues were before. Let's communicate.

I keep saying that. Let's communicate. But it all boils down to communication. That's a big part of this. And you know, let's make sure that everybody understands what we're trying to accomplish moving forward. So do you have to combine finances right out of the gate in a second marriage?

No, you don't have to. It's a good goal to work toward though. But I understand that mechanically that can be difficult for a lot of people right off the bat. Usually there's some trust issues that you may not even consciously recognize. But if you came out of a marriage where money was an issue, you probably have some trust issues whether you know it or not. Yeah, I can imagine that being the case for most people that are in that situation. And you know, another thing that they're thinking about here, you have blended families, in many cases, right? Not only do you have a greater amount of assets and in a bigger portfolio, but also you have children, in many cases, you're bringing in introducing to the family may be on both sides could be one but could be on both as well. So there those kids obviously present some pretty significant and specific financial challenges. So how do you work that in, John?

Yeah, this is a tough one. Because if you think about the previous marriage, again, that this family came out of, those kids are going to have different ideas about money and different expectations about what mom and dad pay for versus what I pay for myself and all that kind of stuff. And so you can have a lot of challenges there when you're combining kids with different expectations as well as spouses who have different expectations.

And then sometimes, some kids might just be more expensive than others. Like as an example, I've seen clients who they're getting remarried. Let's suppose that the husband has a couple of kids that are college age or older at the time he's getting remarried. So they're not in the household.

They're not really part of the picture. And maybe wife has a kid or children that are still high school or middle school age. So they're coming into the house. Well, are we going to have a situation where husband is resentful? Even again, if he doesn't consciously realize it, is he resentful of these kids who are now back on the payroll? He was essentially empty nester. Now he's got kids on the payroll again. Is there some resentment there, whether he recognizes it or not, towards those kids?

Because they represent expenses. So tricky situation. Got to make sure that we're talking through all this. You know, we talk about bringing in, you know, I'm not going to say baggage. Children are not baggage, but bringing in things on the outside, right? We talk about having extra assets and money, but you also have a lot of debt in some cases, too, right? So what if one party comes in with maybe student loan debt or big credit card debt they bring into the relationship where the other spouse does it?

How do you sort that out? So at some point we have to say, all right, are we combining our lives or not? And if so, is his debt now her problem?

And is this something that we're going to work together to eliminate? I mean, that's also true in the first marriage. Maybe somebody comes in with a huge student loan, the other spouse didn't have one. I would say if we're going to get married, like anything good that one brings to the table is shared with the other. And, you know, same with debt. Anything bad you bring to the table, it's now a team effort to get rid of.

So I understand people are going to have different philosophies on that. And a lot of spouses, like, let's say that one spouse brings debt to the marriage and the other one doesn't. Often the spouse bringing the debt doesn't want the other spouse to participate in the paying down of that debt because they feel like, well, this is my thing. This is my baggage. This is my problem. Why should be the one to handle it?

Okay, fine. But again, let's make sure everybody's on the same page and let's really understand what's truly going to be best for the marriage. I mean, if it's a situation where let's say husband makes $120,000 a year, wife makes 50, but she also brings a lot of debt to the picture. Well, if we're keeping finances separate and she's going to try to pay that debt down out of her income, it could take years.

Whereas if they combine income and combined debt, maybe they can knock it out really quick. And then, you know, clean slate, they're moving forward, working together from that point. So don't get too hung up on, well, this is my problem or, you know, this is my issue to deal with.

Oh no, let's look at this as a team effort. Talk about what you should do with your finances when you get remarried. Now let's talk about, I guess, changes you have to make on a lot of say paperwork, documentation, but I think beneficiaries obviously first and foremost, and then I guess insurance is another category where you have to really dive in and make the appropriate changes.

Yeah. So when we're talking about beneficiary designations, it is life insurance. It's also retirement accounts. So any retirement accounts, IRA, Roth IRA, 401k, anything like that is going to have a beneficiary on it. And the thing that's important about the beneficiary is it overrides your will. It does not matter what your will says, the life insurance or the retirement account is going to go to the person who is the beneficiary. It doesn't matter what logic would dictate, doesn't matter what your legal documents say, the beneficiary designation rules the bay.

So as you can probably imagine, there have been many scenarios in history. I've never encountered one personally, thank goodness, but many scenarios in history where, you know, there's a bitter divorce, husband and wife go their separate ways, husband gets remarried, married 20 years, couple of kids in the new marriage, ex-wife is completely out of the picture, husband dies, guess what? Forgot to update his beneficiary designation on the life insurance, which still says that the ex-wife gets the life insurance money. This has held up in court time and time again.

There is no dispute about this. It goes to the ex-wife because she was the beneficiary. So you have to update that stuff. Usually people are going to think about the life insurance. Often they don't think about the fact that there are beneficiary designations on the retirement accounts too.

So it's just one of those things to periodically review anyway and make sure this is still how we want things. But especially in the case of a remarriage, let's make sure that the new spouse is the beneficiary unless, of course, there's some kind of agreement. Well, maybe you have kids with the previous marriage and you want to keep life insurance with the ex-spouse because then the kids would fall completely on her.

So, you know, there's a lot of nuances like that, but we want to make sure that's all been thought through. Trenton Larkin Beneficiaries are going to be a primary look here into estate planning. But what other considerations do you need to make then about your estate plan when you get remarried? So one of the things we see here that's often a little tricky is how do we handle inheritance, especially when there are not only kids from previous marriages, but also kids from the second marriage produced by the second marriage. So let's suppose that one spouse brings more money to the marriage, the second marriage, than the other spouse. As an example, let's suppose that a wife, wife-to-be, inherited money from her parents and she brings a million dollars that she just inherited to this new marriage.

And then she has two kids, her new husband also has two kids. Now, wife dies. What happens to the million dollars? Well, for now it's going to go to the husband until he dies.

And then what happens to it? What if his will says, well, I leave everything to my kids? Well, that's not fair, right? She inherited money from her parents. Doesn't it make sense that that money would go to her kids or at least that they would share equally in it? So often we have to have a trust involved here, not just a will that essentially says, all right, well, at the time of death of one spouse, everything goes to the other spouse for the remainder of his or her lifetime. And then how do things get divided up from there with his kids and her kids from previous marriages? Obviously there's not a perfectly clean way to do this, but what you definitely want to avoid is what I just described, where money comes in through one family and ends up with the other spouse's children.

That's usually not going to be great in any scenario. Now, it could be that in that second marriage, he considers her kids to be his kids and she considers his kids to be her kids. And you're fine with it being distributed equally among all those children. But again, you don't want to assume that we want to talk about it.

All right. Last thing I have for you, John, what do we do with the financial advisors if we get to this point, if one spouse has one and another has another, how do we, how do we divide the financial advisor up? Yeah, good question. So I'm a big believer in people not having multiple advisors because you could be getting conflicting info. Not that either is wrong necessarily, but it's maybe one person has an approach that would work and another advisor has a different approach that also would work.

But if you're trying to combine the approaches, it doesn't work really well. So in a lot of cases, you're probably going to want to go one direction or the other. Now, a lot of this is going to hinge on how much you are combining your finances. I mean, if you're still keeping pretty separate finances, I suppose you could still have your separate advisors. But if we're trying to do good tax planning and everything, I mean, we really need to know what's going on in both spouses' financial picture.

So yeah, I mean, as difficult as it might be, you're probably going to want to pick one horse or the other. All right. And for you over at Rosewood, do you encourage people to sit down with an advisor ahead of either marriage or remarriage and have these conversations with you first or is it something where you kind of come in after that union's happened? Whenever possible, it's best to have these conversations up front. Now, it might be a situation where it's kind of a whirlwind, the new marriage happening, and you just don't have time to have that conversation until after the fact. Fine.

But let's try to do it fairly early on, not after you've been married for a year and you've already developed your habits and your behaviors and your resentment of the other person over their habits and behaviors. So yeah, anytime we can have these conversations ahead of time, it's usually better. All right. If you want to have those conversations, you can always do so by calling 800-545-2991.

You can call or text again, 800-545-2991. All right. We will conclude this three part series with a conversation about divorce, a little harder conversation to have, but again, some important financial decisions that need to be made and what's best for you during that process. We will discuss that coming up on Mr. Stilman's Opus. John, as always, thank you for your time. It was a pleasure. We'll talk to you soon. Carolina Wealth Stewards doing business as Rosewood Wealth Management is a registered investment advisor in the state of North Carolina. The material presented is intended to be general information and should not be construed by any consumer as the rendering of personalized investment advice.