Anyone who has ever watched any of the fine cinematic versions of Pride and Prejudice knows that, even in Regency England, romance and finance were nearly inseparable. As Jane Austen famously notes, “It is a truth universally acknowledged, that a single man in possession of a good fortune must be in want of a wife.” While our modern take on this truism would probably be shaped with a different gender emphasis, most of us would admit that at some point in any relationship, the topic of money—how to manage it, whether to spend it, how to prioritize it—is going to be front and center.
This is especially true for second marriages or any time a blended family is being created. Whether the new family is formed as a result of divorce and remarriage or the death of one or both of the new couple’s prior spouses, financial planning and money considerations are crucial. As with everything else where relationships are concerned, a successful outcome hinges on good communication between the new spouses, preferably aided by the involvement of a professional financial planner and possibly a trusted legal advisor.
Suppose, for example, that one of the partners comes to the new marriage with contractual obligations to an ex-spouse; these must be clearly communicated and understood by the new spouse. Couples who will be living in a community property state should carefully stipulate assets that will remain as separate (non-marital) property. Normally, these would be assets that either partner brought into the marriage or inheritances received after the marriage began. Both spouses should give careful attention to the form of ownership of such assets. If they are held or placed in an account designated either “tenants in common” or “joint ownership with right of survivorship,” they will typically be considered commingled assets belonging to both spouses equally. This means that assets to be maintained as separate property should be held either in a trust designated for that purpose or in an account owned only by the partner who owns the assets.
This can also bring up the necessity of discussing each partner’s expectations about assets to be left to children in the blended family. For example, if educational trusts were created by one of the spouses before remarrying, the new spouse needs to understand that these assets will likely be maintained as non-marital property and used for the benefit of the children brought into the marriage by the spouse who created the trust. On the other hand, the new spouses may want to formulate a clear agreement about any financial support or inheritance that will be provided by each to their respective step-children. All these understandings and agreements should be clear to both parties and should be captured in a will, trust, or other legal document.
Both spouses should also carefully review any insurance policies, annuities, or retirement accounts to ensure that the beneficiary designations are up to date and aligned with the respective owners’ intentions. The untimely death of one of the spouses is not the time to discover that an ex-spouse is the named beneficiary of an account that the deceased owner intended for the benefit of the new spouse.
There are many other conversations that need to occur around money and finance, and this is a good place to repeat how helpful it can be to involve a professional, fiduciary financial advisor who can act as an impartial third party to facilitate thorough communication. The advisor can help both partners in the relationship better understand both their own and their partner’s goals, priorities, and needs, setting the stage for a financial approach to the new marriage that offers a path to success that works for everyone.