Finances loom larger the second time around. What will happen to a teenaged-child’s financial aid eligibility? What are each person’s financial obligations from any prior marriages? U.S. News & World Report’s recent article, “6 Financial Considerations for Remarriage,” lists six financial considerations and steps to take before you remarry:
1. Revise Your Budget. Whether this is your first, second, or third marriage, couples need to create a budget for daily spending, monthly expenses and big-ticket purchases. You should also talk about your household expenses and costs related to children from prior marriages. If you have to pay alimony, let your new spouse know. It’s also a good time to talk about credit card debt, past investments you've made and retirement accounts. You may want to draft a prenuptial agreement.
2. Inform your Fiancé of Any Financial Obligations, Including Child Support. Before getting married, review the laws to see how child support may be impacted by marriage to a new person. While it's unlikely that you would lose your child support if you remarry, the family court may reduce the amount. If a person paying the child support is remarrying, they should talk to their partner prior to the marriage to make certain they understand the amount of the payments.
3. Check Insurance and Benefits. A frequent mistake when remarrying, is not updating the beneficiaries of life insurance policies. You also may have to look at other updates to your coverage, like who will be on your health plan, and you may need to modify your homeowner’s insurance with a spouse and children in residence. Understand that if you get government benefits like Medicaid or Social Security, you could forfeit your Medicaid eligibility when you remarry if your spouse's income is too high to be eligible. You might also discover that your Social Security benefits from an ex-spouse will stop, after you remarry.
A second marriage may also increase a parent's income for federal financial aid purposes for college. If a parent is the custodial parent for the FAFSA (Free Application for Federal Student Aid), their income now may include their new spouse's income. It is important to discuss saving for college and tuition costs, as well as if either partner has children from a prior marriage, whether each spouse will save money for tuition costs.
5. Estate Planning Is Critical. Check your estate planning before remarrying. That includes a will, medical powers of attorney, do not resuscitate orders, durable powers of attorney, designations of guardianship or consent to adoption and various trusts, including trusts for special needs children. If you have children from a prior relationship, hire a qualified estate planning attorney.
6. Create an Inheritance Plan. If you have children from a prior relationship, you need to put the right estate planning documents in place to protect them from being disinherited. In some states, a last will and testament may be enough, but in others it may make sense to also have a revocable living trust.
Talk with your estate planning attorney about how you and your spouse want your estate to be divided among your various children. The surviving spouse is under no legal obligation to provide for their stepchildren. The estate planning attorney will know what strategies will work best to carry out your wishes and protect all your offspring.
Reference: U.S. News & World Report (November 18, 2019) “6 Financial Considerations for Remarriage”
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