Before any marriage, it’s important to talk to your soon-to-be spouse about finances. But this discussion becomes even more important if you are getting married later in life. Whether it’s a first marriage in your 40s or you’re getting remarried after a divorce, you’ve typically built up your assets once you’ve been working for a couple of decades. You have a larger 401(k) and you may own property or even a business. All of these need to be protected. Most importantly, you may have children who need to be taken care of, or considered in your overall financial plan.
The financial conversation before marriage will likely include many more topics than those for a young couple getting married in their 20s. For example, one or both individuals may be paying or receiving alimony or child support. If you’re paying it, you need to decide what that will look like in your blended budget. If you’re receiving child support, you need to decide how it will be used for that child. Will it be put towards household expenses like groceries for the kids or will it help with college funding? Another important topic you’ll need to talk about is life or long-term care insurance. Do either of you already own some, who is the beneficiary of the life insurance and what are the terms of the insurance, life or long-term care? Other possible assets include employer-sponsored retirement plans, which can be one of the larger assets an individual accumulates. With current regulations, your spouse is automatically named as the beneficiary for those plans, but what if you want to include your children as beneficiaries too? You need to talk about that with your new husband or wife.
Speaking of children, determine what kind of legacy you want to leave. You’ll also have to decide how you want to take care of each other’s children. If something happens to one spouse, will their children be protected? And these days, it’s not just the children you have to think about. If something happens to one spouse, do you have plans in place for what will happen care-wise to their elderly mother or father?
So how do you protect your assets and make sure your financial goals are accomplished? For some couples, considering a prenup is dependent on each situation, but usually is a solid strategy. Not only will a prenup outline all of what’s been talked about here, but also provide a blueprint of what will happen to assets. Another option is setting up a trust, but regardless, the soon-to-be spouses should discuss options with their financial planner and attorney to determine the best course of action.
Bottom line – before your later-in-life marriage, have a conversation about what you have, what you owe, your financial objectives and what you want to happen with your assets. You need to decide how two households are going to be merged together and what that blend will look like both in retirement and when one spouse passes away. It may not sound romantic, but it’s critical to protect what matters most to you in this new marriage.