Second Marriages: Planning An Estate

Financial PlanningGeneral
Second Marriages: Planning An Estate

Entering a new marriage brings tremendous changes, regardless of when it happens. A bride and groom are getting to know each other, dreaming together about the future, and figuring out how to intertwine the nuances of social, emotional, and physical lives. But, when love comes later in life, especially if it initiates a second (or third) marriage, there are many additional factors for the happy couple to consider, in order to lay a solid financial foundation. Estate planning, in particular, is one of the financial conversations that should be had sooner rather than later.

Conversations for Planning

Working together to establish and build a strong estate plan can help initiate essential conversations between spouses and work through how each want to share and eventually distribute the combined and respective assets. Tools such as prenuptial agreements, life estate deeds, trusts, and beneficiary designations can be used to allocate certain assets for specific individuals or purposes. Working through these options, together, can ease the strain of uncertainty and clarify expectations between spouses. Couples should consider discussing these approaches with an advisor and attorney as they have varying benefits depending on future goals.

Communicating with Purpose

Newlyweds should not delay the discussion of estate planning, because it creates an opportunity to communicate their desires with any adult children or other family members who may be affected. In blended families, more people are generally affected and have higher stakes and opinions about how assets should be handled, which can make an estate plan significantly more complex. Adult children may fear losing an inheritance and are more likely to have differing frameworks, desires, and expectations when approaching financial matters. Navigating these conversations can be challenging, so there is a natural tendency to ignore doing so. This is often detrimental to the new couple. Working with a trusted advisor who can help navigate the necessary decisions and conversations makes estate planning much more feasible. Although creating and communicating the choices can be tough, communication pays off in the long term, when family members have clarity about what to expect.

Looking at Today’s Finances

One of the first financial steps to navigate together prior to determining an estate plan is to understand each other’s current financial situation. When two become one, sharing resources is a natural result. Spouses who live together happily share living quarters, meals, home furnishings, vehicles, and daily expenses. Some couples enter the marriage with relatively balanced resources, while, in other situations, one spouse may have much more than the other in terms of financial assets. One may also have a higher earning potential than the other spouse, and one spouse may bring more debt or ongoing expenses into the marriage than the other.

Budgeting for Spend-Down

Creating a budget together will be an invaluable experience for newlyweds (or better yet, fiancés) as it will provide a more thorough understanding of each other’s financial goals and aspirations. In particular, budgeting for health care costs, especially long-term care, will be essential. Suppose one or both spouses end up applying for Medicaid. In that case, the state will “look back” on both of your financial histories over the five years leading up to eligibility for skilled nursing. That is why managing your resources well from the onset of your marriage is crucial. Understanding each other’s financial landscape and planning for asset protection is easiest to do well before Medical Assistance is needed. An elder law attorney can help determine what pre-planning and spend-down options are available based on the unique situation.

Mapping Goals and Objectives

Another important financial goal for newlyweds to achieve is to designate certain parts of an estate for specific use, especially if the couple is marrying later in life. For these newlyweds, the complexity of resource sharing and merging is accentuated. How do couples navigate these conversations without hurting a new spouse’s feelings or creating animosity with your spouse’s family? Partnering with a trusted financial and legal advising team can help tremendously. Work with advisors to identify goals as individuals and as a couple. Advisors can create a map of a couple’s assets and expenses and help them work backward from their objectives to take the necessary steps to reach their financial legacy goals.

Marriage later in life brings many wonderful changes, but its complexities should not be overlooked. As couples consider how to share resources with a new spouse lovingly and how to discuss the new estate plan with each other and families, ask a trusted advising team to help. The importance of thoughtful estate planning during a change at this stage is all the more essential.

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