Money is the No. 1 cause of divorce, and your divorce probably cost you a lot more than you thought it would. You want this new marriage to last as long as you promised in your vows, so you need to plan for your death.
It's easier to take these steps before you tie the knot. But even if you've already remarried, it's not too late to make sure that your estate plan accomplishes exactly what you want with your money in providing for your family.
You can accomplish this by following a three-step process that ensures your estate plan match your goals once you've remarried:
Step 1Take a look at these issues and make sure you've followed through on each one:
- Sit down with your spouse-to-be after each of you has made a list of all your assets. Share the lists and discuss how you want your estate wishes carried out.
- Determine what financial issues you will handle together as a couple. Are you going to build a new house and each contribute half of the funds? Will you stay in one spouse's home and sell the other? What do you plan to do at retirement? And what does each of you want to have happen at your death and at the death of your spouse? It is critically important to make clear your expectations and desires upfront to avoid any misunderstandings and hard feelings later on.
- Decide how you're going to handle the assets of children and stepchildren. Maybe one of you doesn't have children, but wants to provide full support by leaving your assets to the children that you are acquiring through your new marriage.
- Make a list of each of your life insurance policies. Include the company, owner, beneficiary, the amount of death benefits, and the kind of policy (individual term or permanent, group policy, etc.).
- Decide how you'll handle any inheritances. What do you want to have happen to that money?
- Do either of you expect to have to support your parents during their retirement, or will they come live with you? Do they need to be provided for in your estate plan?
- Each of you should read the other's divorce decree so that there are no surprises down the road.
Many couples, however, find it easier to have a financial planner ask the needed questions, review information, work through sensitive issues and act as a neutral third party.
Step 2Now you've got some hard numbers and an idea of what you want to have happen upon your death. Even if you don't own a lot of assets, it's smart to consult an estate-planning attorney, especially if you have children.
Your divorce invalidated your will, so at the very least you'll need a new will. You'll probably also want a new durable power of attorney, living will and health-care proxy, especially if your former spouse had been given power of attorney for you. At this stage, your checklist needs to continue as follows with your attorney's advice:
- Consider a prenuptial agreement as a way to protect the assets you're bringing into the marriage for your children, your parents, or other family members. Does one of you expect to make much more money than the other, or is one spouse cutting back his or her outside workload or quitting altogether to take care of the new family? If this is the case, each of you should have separate attorneys to negotiate prenuptial agreements and you should start at least a couple of months before your marriage so no one feels rushed. Don't discuss the prenuptial agreement with your fiancé; it may create bad feelings. Let your attorneys negotiate and then report back to you individually. Many attorneys recommend that the agreements even be signed in each of their own offices.
- Look at your current life insurance and retirement plan beneficiaries. Your divorce decree may stipulate who the beneficiary must be, so you won't be able to make your new spouse your beneficiary. Or, now may be the time to split up your retirement plan with your former spouse (if it's possible under your divorce agreement or with the specific type of plan you have), so you can name your new spouse the beneficiary of any future assets.
- Do you need more life insurance? If you're taking on more financial responsibilities with a new spouse, perhaps new stepchildren, or a new home, the answer is probably yes.
Step 3Once all of these steps are in place, it's important to communicate to your respective families that you have put your financial house in order. This is especially important with children, who have trouble adjusting to stepparents anyway, and may think that the new stepparent has improper financial motives. Just telling them that their education is taken care of and that you and your new spouse are acting in their best interests will go a long way toward defusing any resentment your children (and sometimes even your parents) may be harboring without telling you.
Adjusting to a new marriage is never easy, especially when your first one was not a success. But if you get these financial matters taken care of upfront, you have eased a huge burden for everyone involved.