Remarriage and Estate Planning

Penn Mutual

By Penn Mutual | February 27, 2018

According to recent census data, half of U.S. adults today are married compared to 72% in 1960. While marriage may be on the decline, many are increasingly giving wedded bliss a second chance. A report from the Pew Research Center shows that four out of 10 new marriages are a remarriage for at least one spouse.

For individuals who are in the process of accumulating wealth, marrying again later in life may mean untangling some sticky financial issues, particularly where their estate plan is concerned. If remarriage is on the horizon, here are the most important things to keep in mind as you join forces—and finances—with your soon-to-be spouse.

Managing Assets: To Merge or Not to Merge?

When you and your spouse are both bringing cash savings, real estate and other investments into a second marriage, one of the first questions you’ll have to tackle is how you’ll manage them. That covers relatively simple choices, such as opening a joint banking account, as well as the bigger decisions, like whether to add your new spouse to the title of a home you own.

At this stage, it’s vital to establish boundaries while remaining open to compromise. For example, you and your spouse may agree to keep any assets you brought into the marriage separate, but open a joint checking account to share in household expenses. Having this discussion early on may be helpful in heading off money-related conflicts down the line.

Remember the Kids

If you or your spouse have children from a previous marriage, or there’s a possibility that you may have children together, you’ll need to give some thought to how you’ll pass on your joint and individual assets. Drafting a Will or updating an existing one may be a step in the right direction, but if you have substantial assets, a trust may better serve your purposes. A trust can be used to generate income for a surviving spouse while also outlining how and when children will receive their inheritances. Another added benefit of establishing a trust is the ability to bypass probate, meaning your spouse and children would be able to gain access to your assets with fewer headaches if you were to pass away.

Update Your Beneficiaries

While certain assets can be passed on via a Will or trust, others allow you to name beneficiaries directly. For example, if you have a life insurance policy or a retirement plan, you could opt to list your new spouse as the beneficiary and your spouse can do the same. That’s particularly important if your ex-spouse was listed as your beneficiary and you haven’t changed your designations since getting divorced. Bear in mind that your spouse would be able to choose new beneficiaries for a retirement account once they’ve inherited it.

Look at the Long Term

Healthcare can easily put a dent in your retirement savings, and planning for long-term care should be of particular concern since married couples at age 65 today would typically have at least a 50-50 chance that one member of the couple will live beyond age 90. If you don’t want to drain your nest egg, a long-term care insurance policy can cover the gap. A chronic illness benefit on a permanent life insurance policy can make life more manageable by allowing policyholders to access a portion of their death benefit if they develop a permanent chronic illness. Just remember that it’s better to buy these types of insurance sooner rather than later, since premiums become more expensive as you age.

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