Love is in the air, and for many that means marriage. Marriage, of course, brings a set of joys and challenges all its own. But for those about to marry for the second time (or more), there are particular issues that need to be dealt with in a clear-eyed fashion, to avoid misunderstanding down the line.
That’s why we’re bringing you this recent NextAvenue article by author and personal finance guru Richard Eisenberg, in which he talks about the critical need, especially in second marriages, for “the money talk” between spouses-to-be. Eisenberg also shares his view that the notion of a prenuptial agreement – the dreaded prenup – is not something to be avoided. Some may resist the idea, but properly handled, a prenup can be a great way to get money issues clarified before they erupt into conflicts that can torpedo your relationship.
“The Second Time Around” – Lovely but Challenging
In his NextAvenue article, Eisenberg begins, “Love is lovelier the second time around, according to the 1960 Frank Sinatra song. But what about money and second marriages? That’s a more complicated story, especially for couples with adult children.”
It’s self-evident that most people who marry at 50 or 60 have more money than newlyweds in their 20s or 30s. That’s important because, according to Eisenberg’s article, about one in five Americans over 50 have been married twice. In other words, there’s more money at stake.
In the article, Eisenberg sits down with Terry Savage and Pam Krueger, with whom he co-hosts a podcast, to talk about second marriages and money ahead of wedding season. He also consulted Chicago family law attorney Gemma Allen, whose insight is included in the article. Here is what they discussed.
Begin Talking About Money Early
From the outset, all of the experts agreed that money should be an open discussion, as early as possible in the relationship. Pam Krueger said, “If you don’t start out in a second marriage talking openly about your individual money behaviors and really invite the conversation and not feel like it’s the elephant in the room, I think that you’re creating tension that’s just going to mount.”
But the group was quick to point out that this discussion doesn’t have to be heavy, argumentative, or contentious. In fact, it can be a great opportunity to discuss each other’s strengths and weaknesses, and to learn ways to face your financial future as a team.
This is where the controversial idea of a prenup comes into the picture. Attorney Gemma Allen argues strongly in favor of a prenuptial agreement, especially for second marriages with blended families and adult children. Here’s why.
The Importance of Prenups for Second Marriages
“While people react badly to the concept of prenups,” Allen told Eisenberg, “they force a realistic, transparent talk about money.” Moreover, quite apart from the stereotype, prenups today are actually very flexible and easily customized to an individual couple’s needs.
Terry Savage agreed with her. The cliché that prenups are simply a way to divvy up assets before a potential divorce is less accurate nowadays. Instead, she said in the NextAvenue piece that a prenup, especially in a second marriage, “is about how you will handle and organize your money during marriage when you each come to it with assets and perhaps some debts.” This includes both daily expenses as well as long-term estate planning.
According to Eisenberg, “Under current law, a married couple can exempt $24.12 million from estate and gift taxes. The unlimited marital deduction lets one marriage partner transfer an unlimited amount of assets to their spouse without incurring a federal estate tax.” Because of this, Allen believes that “everything including the kitchen sink” should be in a prenup, including “ownership of homes and second homes, retirement accounts, investment accounts and savings accounts as well as who will pay for what (i.e. bills, college tuitions).”
When it Comes to Investments, Get It in Writing
The trio addresses another sticky but vital subject for couples to discuss openly: Investments, including risk tolerance. In this arena, the prenup can be used to spell out who will manage the portfolio. Krueger said, “If one partner has a lot more assets and savings and investments than the other, you really want to figure out: Does that mean that’s going to be the person who’s going to make the big decisions for the household going forward with the investments?”
The article also singles out a frequent source of conflict, the question of which money will the couple keep separate and which will they merge. These answers belong in the prenup, too, according to Savage. “Part of your agreement could be that the major assets and the growth of them remains separate property,” she said.
Three More Key Money Topics
Eisenberg lists three other considerations for couples planning a second marriage:
- Debt: “Who owes how much and how will that debt get paid off?”
- Social Security and retirement dates: “When will each partner start claiming benefits? When does each expect to retire?”
- Taxes: “How will being married affect which tax breaks they can and can’t claim? Should they file joint or separate returns? (Usually, joint is wisest.)”
To this, Krueger added an important warning: “One partner feeling left out of the financial decision-making in a second marriage can spell trouble for the relationship. That’s the kind of resentment that builds up and gets really, really serious.”
Once again, all experts agree: start talking about money as early as possible. Red flags for the relationship become clearer when talking about money, especially when a prenup is involved. With that in mind, the sooner you can get on the same financial page, the healthier your relationship is likely to be for the long haul.
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(originally reported at www.nextavenue.org)