Feb 10, 2023
Money conversations matter in second marriages
Second marriages are fairly common, as divorced individuals hope to learn from their first marriages while looking for love again. According to a Pew Research Center report, 40% of new marriages included one partner who had been married before.1 In our view, if you have a loved one who is considering walking down the aisle again, discussions about how they will handle their finances with their new spouse might be a priority.
For many, money represents security, freedom, the ability to provide and the opportunity to pursue one’s passions. Money values may be influenced by family, social groups, income levels and life experiences, not the least of which is a first marriage. In the first marriage, many attitudes and beliefs about finances are developed, and norms are established. Money may even have been one of the issues that led to divorce in the first place. It’s not surprising that combining finances with a new partner can cause anxiety and a fear of losing control over one’s financial independence.
In our experience, good communication is key to the success and happiness of every relationship. Discussing the family’s finances in a second marriage should be first and foremost. It’s important to understand the role that money plays in their partner’s everyday life, their tolerance for risk in their investments, and their thoughts toward saving and spending. Do their goals and views align? What does retirement look like for them? Is leaving an inheritance to family important, or do they prefer to spend the majority of their assets during their lifetime?
Our experience suggests that as the relationship becomes more serious, each person should disclose, if possible, a rough accounting of their assets, debts, income and expenses. Large disparities in these areas can be a source of contention and possibly even resentment if the partners have different expectations of how (or if) they will share income and expenses, as well as who will own or manage investments.
While some partners continue to hold an individual bank account in their second marriage, it’s common to share a joint account as well. Individual accounts allow partners to feel independent and self-sufficient. They can also be the source of funds to pay expenses for financial obligations to children from a previous marriage, whether the expenses are court-ordered or unwritten planned expenditures.
For the joint account, each spouse can contribute an agreed-upon amount, which could differ according to income levels, with an understanding of how the funds will be spent. Disagreements can arise when expectations of the budget for home improvements, vacations, holidays and other large expenses do not align, or when the value that each party puts on a particular expenditure differs.
In addition to cash flow conversations, we believe that it’s valuable to clarify what assets and liabilities will be shared jointly. Will both pay for a liability of one spouse? Will savings prior to the second marriage remain as that individual’s only? Unequal sharing of finances can test a couple’s trust in one another, and trust is often already more challenging to build after a divorce.
Children from a previous marriage
A major source of contention can arise when children from a previous marriage stand to inherit everything, or simply more than the new spouse. This may cause the new spouse to feel their love is not being completely reciprocated. It’s important to understand that it’s fairly common for assets to be left to children from a prior marriage, as a sense of loyalty and obligation runs strong. In our view, the choice to leave assets to their children does not mean that the partner doesn’t take the new marriage seriously, and oftentimes can make them feel guilty.
On the flip side, the new spouse can harbor resentment and fear that their partner is not fully committed. Discussions about these issues may be difficult and uncomfortable, but are important nonetheless. Consulting an attorney regarding estate planning can be helpful if one or both partners desire to take care of their spouse and their children upon passing away.
When deciding to marry again, your loved one should go into it with their eyes wide open. A second marriage holds a unique set of circumstances that can damage the relationship if taken for granted. Honesty and a true understanding of each partner’s finances before marriage, as well as each partner’s expectations going forward, can help make the marriage last.
ABOUT THE AUTHOR
Tina is a Wealth Manager and member of the Investment Committee at BDF. With almost two decades of investment and financial planning experience, her holistic and personalized approach gives clients confidence and comfort with their finances. Tina enjoys working with individuals going through divorce, and specializes in advising blended families. She holds the Chartered Financial Analyst (CFA) designation and is a CERTIFIED FINANCIAL PLANNER professional.
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