By Sarah O’Brien, CNBC
Remarrying can come with a renewed sense of joy — as well as financial baggage that wasn’t there the first time around.
Whether your previous relationship ended due to divorce or death of your spouse, there’s a good chance you or your new partner — if not both of you — are entering your next marriage with a range of assets, debts and other financial obligations, not to mention children who may need support now or down the road.
This makes it important to determine how you and your new partner will handle the various aspects of your financial life, experts say. And this goes far beyond deciding whether to keep separate checking accounts or determining who pays which bills.
“You should have the conversation about finances as early as possible in the relationship,” said certified financial planner Jim Graham, investment advisor representative at Orange Rock Wealth Management in Peoria, Arizona.
“But even if you’re already engaged or married, it’s never too late to have the conversation,” Graham said.
Here’s what to consider.
Assess the risk
It’s not exactly romantic, but you should figure out if your new partner is a financial risk — which is a fairly common occurrence, Graham said.
For example, one spouse may have an addiction to gambling or drugs or have frequent tangles with the IRS over tax returns, he said. Or, perhaps the person owns a business or wants to start one, and wants the new spouse to help finance it. And debt — whether due to credit cards, student loans or other obligations — also can cast a cloud over a marriage if there’s no plan to tackle it.
“There may be few financial risks with the new spouse, and that’s great, but there also may be a significant amount,” Graham said. “It may cause you to do some planning that you otherwise wouldn’t have to do.”
Consider a legal agreement
If you haven’t yet said your wedding vows, it’s worth considering a prenuptial agreement (or prenup, as it’s called).
“The first time you get married, you’re less likely to want to use a prenup,” Graham said. “The second time around, you’re more likely to have it.
“It’s easier to have that conversation when you’ve already been through a marriage.”
While a prenup is mostly associated with determining in advance who would get what in the event of divorce, the agreement also can spell out how finances will be handled during the marriage. That could range from outlining whether you and your spouse’s incomes will be conmingled for household bills to ensuring a future inheritance remains solely yours (or your children’s) no matter what happens to your relationship.
If you already are remarried, you could consider a “postnup,” which generally is the same idea as a prenup but is executed during marriage as opposed to prior to it.
Either way, “it’s important to have some sort of clarification about each spouse’s financial situation and obligations,” said CFP Avani Ramnani, director of financial planning and wealth management at Francis Financial in New York.
Update your will and beneficiaries
If you want your assets to end up where you intend, it’s important to update your will, as well as the beneficiaries on retirement accounts, life insurance policies and the like. Be aware that those beneficiary designations supersede any intention stated in your will.
And if you want your children from a previous marriage to take ownership of a particular asset at your death instead of your new spouse, it can take some extra planning.
“We see this all time,” Graham said. “If you don’t plan appropriately, you could die and have a spouse not sharing with kids or vice versa.”
For instance, 401(k) plans require your current spouse to be the beneficiary unless the person legally agrees otherwise.
This means, say, if your new husband is your listed beneficiary and you predecease him, those 401(k) assets become his to do with as he wants, which might not include passing on any money to your kids. Same goes for other accounts for which the spouse is the beneficiary and, typically, those on which you and your spouse are a joint owner.
Be aware that if you die without a will — called dying intestate — the courts in your state will decide who gets what. That process is public and often messy if would-be heirs have competing priorities and conflicting notions of what is rightfully theirs.
Odds and ends
If you’re remarrying at a later age, you may want to consider how you’d handle the cost of long-term care — which generally means getting help with daily living activities — if either you or your spouse need it down the road.
“If you’re remarrying in your 30s, it’s not the most important thing to address, but if you’re 60 or older, that’s something that should be looked at,” said Graham at Orange Rock Wealth Management.
Additionally, you and your new spouse should identify your shared goals and vision for the future.
“Especially if you’re in your 40s or 50s, you have much fewer years that you’ll be working and able to save,” said Ramnani at Francis Financial. “So think about what your new future looks like and how the two of you will plan for your goals.”