8 Money Moves to Make Before You Remarry

By Damian Davila on 15 March 2017 0 comments

Every year, about three per 1,000 Americans divorce from their spouse. Since about seven per 1,000 Americans marry every year, there is a chance that some divorcees will eventually tie the knot again with a new partner.

But before you remarry, you should evaluate your finances. Let's review eight money moves that will set you both up for financial safety and success.

1. Make Amendments to Your Will (or Make One!)

The joy of finding love again can make you look at everything through a rosy filter. While no one likes thinking about their mortality, especially close to a big wedding day, the reality is that not updating your will could leave your new partner (and potential dependents) with a messy court battle for your estate. Review your current will and update it as necessary. For example, you may redistribute your estate to include your new dependents and choose a different executor — a person who will manage your estate and carry out the orders in your will.

If you don't have a will, then setting one up should become the top priority of all money moves before you remarry. In the absence of a will, a judge will appoint an administrator who will execute your estate according to your state's probate laws. What is legal may not be the ideal situation for your loved ones, so plan ahead. (See also: What You Need to Know About Writing a Will)

2. Update Beneficiaries Listed on Your Retirement Accounts

Even after setting up or updating your will, you still need to update the list of beneficiaries listed for your retirement accounts. This is particularly important for 401K plan holders. The Employee Retirement Security Act (ERISA) stipulates that a defined contribution plan, such as a 401K, must provide a death benefit to the spouse of the plan holder.

Your beneficiary form is so important that it can supersede your will under many circumstances. When updating your beneficiary form before you remarry, there are three best practices to follow:

  • Get written consent from your previous spouse, if applicable, to make changes;
     
  • Second, designate only children who are of legal age so they can actually carry out their wishes;
     
  • Third, find out the tax implications for beneficiaries other than your spouse as a large windfall could unintentionally create a financial burden.

3. Consider Setting Up a Trust

Since we're talking about potential financial burdens, many of them could come out of an estate with lots of valuable assets being divided among many beneficiaries, many of them very young.

When you have accumulated a lot of wealth over the years, you could be better served by a trust than by a will for several reasons, including keeping your estate out of a court-supervised probate, maintaining the privacy of your records, and allowing you to customize estate distribution. While the cost of setting up a trust can be up to three times that of setting up a will, it can be a worthwhile investment to prevent costly legal battles. (See also: Should You Set Up a Trust for Your Child?)

4. Be Aware of Potential Spousal Benefits From Social Security

If your previous marriage ended on very unfriendly terms, you and your spouse may feel that you don't want to leave a penny to each other. Regardless of how you feel, the Social Security Administration (SSA) may still legally entitle your ex-spouse some benefits under certain circumstances.

If your former marriage lasted at least 10 years, your previous spouse can receive benefits on your SSA's record as long as he or she:

  • Remains unmarried;
  • Is age 62 or older;
  • Is entitled to Social Security retirement or disability benefits; and
  • Has an entitled benefit based on his or her own work that is less than the one that he or she would receive based on your work history.

Even when you have remarried, your ex-spouse could receive a check from the SSA based on your record. This is a conversation that you should have with your new partner before you tie the knot so that you're both on the same financial page.

5. Set Up Mail Forwarding With USPS

Depending on how long ago you got divorced and whether or not you kept the same home from your previous marriage, you could still receive some correspondence addressed to your ex's name. While getting a letter from an aunt isn't a big deal, receiving a large monetary gift, important bill, or legal notice could create discussions that you don't want to have.

To avoid such issues, spend $1 to set up mail forward with the USPS so that all correspondence under your married name (and maiden name, if applicable) is forwarded to a new address. Chances are that your ex-spouse already did this, but it's better to be safe than sorry. This service costs $1 per name, so you would need to spend $1 for a married name, and another $1 for a maiden name.

6. Put Your Debts on the Table

Transparency is a pillar in any relationship. No matter how large your financial obligations may be, your new spouse will truly appreciate finding out now rather than when you're struggling to cover monthly bills, applying for a mortgage, or trying to finance a new car.

Sit down with your soon-to-be spouse and go through your debt payments, such as student loans, credit card balances, mortgages, car loans, and installment plans. Going over your debts will allow you to have an idea of where the money is going every month, start talking about the potential commingling of finances, and be aware of each other's liabilities. (See also: What Happens to Your Debt After You Die?)

7. Disclose Any Alimony and Child Care Payments

Whether you're the issuer or recipient of court-mandated spousal support, spousal maintenance, or child care, make sure to disclose those moneys to your spouse and the corresponding expenses that they cover. Failing to help cover certain expenses while making large payments somewhere else could cause tensions between you and your new partner when not previously discussed.

Be upfront with your partner and tell the whole story. It helps you establish clear expectations about your joint financial future.

8. Evaluate a Prenuptial

Depending on your own financial plans, you may want to fully combine your finances — or not at all. For example, you may have accumulated some serious joint credit card debts from your previous marriage and you wouldn't want to transfer that responsibility to your new spouse or start a new string of similar debts. Evaluating a prenup before tying the knot is a necessary conversation for any couple with large differences in individual net worths, levels of retirement savings, and stakes in businesses. (See also: 5 Ways to Protect Your Business During a Divorce)

While thinking that your second marriage may fail like your first one did may sound a bit pessimistic, the reality is that it does happen. In 2013, four out of 10 new marriages involved remarriage.

Consult with your financial adviser, lawyer, or accountant about your unique financial situation and determine whether or not you need to present a prenup agreement to your soon-to-be spouse. Keep a positive attitude, and remember that this is a time for celebration. Once you've done your homework, you'll be able to fully enjoy your marriage without any financial worries holding you back.

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