Finances in Your Second Marriage

second marriage and finances

It’s wonderful to find love again after a divorce or the death of your first spouse. It can also be complicated when the new couple decides to marry if one or both has children, debts, and assets from the previous relationship. While money can create a source of tension in any coupled relationship, it can threaten to undo second marriages. However, it doesn’t have to be that way if both partners enter the new marriage with clear knowledge and expectations about the financial situation of the other.

Change Your Will Before You Say I Do

If you already have a will, you need to change it to reflect your new circumstances. If you don’t have a will, now is a great time to create one. Financial advisors who frequently work with couples in second marriages recommend taking one of the following three approaches:

  • Contract to Make a Will: In this situation, both spouses leave all assets to the spouse who survives who will then divide everything between both sides of the family. This can be risky since it’s a written contract that no one can change later. Additionally, the surviving spouse may remarry, divorce, or become party to a lawsuit. These situations can deplete the assets while the will remains unchanged.
  • Elective Share: Under South Carolina Code §62-2-201, the surviving spouse must receive a minimum of one-third of the deceased spouse’s assets. If either of you wish to override this elective share, you must create a pre-nuptial or post-nuptial agreement.
  • Testamentary Trust for the Spouse: When you insert a trust into your will, you can name the surviving spouse as the sole beneficiary. However, he or she must abide by limits on distribution since withdrawing all trust funds at once defeats the purpose of the will. The benefactor receives income from the trust in addition to discretionary distributions. It protects your assets further by adding a co-trustee to your will or having someone other than your spouse manage it. When your husband or wife dies, the proceeds funnel to your children or whomever else you have named as a secondary benefactor. Your spouse can’t alter what you have planned for asset distribution, which protects your assets if he or she remarries or a creditor makes a claim against him or her after your death.

Consider a Pre-Nuptial or Post-Nuptial Agreement

If either of you have concerns about ensuring money is left for your adult children or others after you pass away, writing a pre-nuptial agreement is a good idea. As mentioned above, it’s the only way to supersede South Carolina’s one-third elective share law when one of you die. It also protects assets you had prior to the marriage if you get a divorce. A post-nuptial agreement does the same thing, but you create the contract after you marry instead.

A QTIP Trust Can Be a Good Compromise

Just the act of remarriage can create tension between parents and their adult children. This is especially true when the latter expects to receive some type of inheritance and may worry that the new spouse will receive everything. One way to relieve this tension while still ensuring that everyone receives part of the inheritance is to set up a Qualified Terminal Interest Property Trust, also known as a QTIP. With a QTIP, the surviving spouse receives the interest income from the trust. He or she has no say over who receives the principal balance and how the estate divides it among them.

Estate Tax Concerns

It’s common in second marriages for one spouse to have significantly more wealth than the other. This can cause the spouse with the lower income to lose tax savings if he or she survives longer. By equalizing the two estates, the couple can use the exemptions available to both spouses. If you both have children, it’s important to pre-plan for the payment of estate taxes so that each of them receives an equal payment burden after both of you die.

Meet with an Experienced Family Law Attorney Before the Marriage

Meet with an estate planner if you wish to create a new will or trust prior to a second marriage.  If a prenuptial agreement is the route you’d prefer, Ruth Cate, Rachel Brough, and Margaret Nowell of Cate Law Firm all have served as family law attorneys for several years. We invite you to contact us at 864-585-4226 to schedule a confidential consultation. It might not seem romantic, but getting your financial affairs in order before a second marriage by way of a prenuptial agreement helps to reduce tension and get the new union off to a great start.

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