Before you get remarried, you and your intended spouse should make a plan for the children and assets each of you are bringing to the marriage. Since you have already experienced a divorce from or the death of your former spouse, you certainly understand the importance of having a plan and making your wishes known to your family members.
Start With a Prenuptial Agreement
Many people think of prenuptial agreements as protection in case of a divorce, but they serve other important purposes too. For example, a prenup can specify what portion of your assets, if any, will go to your spouse upon your death.
Even more importantly, these agreements help you and your future spouse establish clear financial practices during the marriage. Consider discussing:
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Whether you will maintain separate checking and savings accounts, joint accounts, or both.
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Whether your income will be considered separate property or marital property.
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Which accounts will pay for regular living expenses.
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How you will handle student loans or previous debts.
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If one of you owns the house you will live in, how will ownership, mortgage payments, and renovations be managed.
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How you will handle ownership if one of you owns a business.
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Whether child or spousal support owed to a former partner will come from separate property or marital property.
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How expenses for existing children will be handled, especially if one spouse has adult children while the other has minor children at home.
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How you will pay for college expenses for children from a prior marriage.
By addressing these issues upfront, a prenuptial agreement can prevent misunderstandings and protect both partners. For more guidance, consider consulting a financial planning professional who can help integrate prenup decisions into your broader financial strategy.
Revisit and Update Your Estate Plan
Once you have talked through the relevant issues and created a prenuptial agreement, you should create or update your estate plan to account for your new spouse and their children. This planning allows you to:
- Create updated powers of attorney for your medical or financial decisions.
- Review and update beneficiaries on life insurance, retirement accounts, and other financial accounts.
- Create or update your will, including naming new guardians for children and/or custodians for children’s assets.
- Create or update your trust, which is critical in remarriage situations.
Trusts Can Protect and Benefit Your Existing Children
Trusts are an excellent planning tool when one or both spouses have children from a prior relationship. They allow spouses to provide for each other and their existing and future children. If one or both spouses have significant assets, trusts can also help minimize estate, gift, and generation-skipping transfer taxes, reducing taxes owed upon each spouse’s death.
Trusts offer several benefits for your children:
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Protect important assets: Keep life insurance policies, business interests, or large financial portfolios safe for your children.
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Provide income while safeguarding assets: Give both minor and adult children a reliable income while protecting the assets from bad spending habits, creditors, divorces, or addictions.
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Use tax exemptions wisely: Reduce estate taxes for your estate and for future generations.
Most importantly, trusts ensure that your loved ones—both your spouse and children—are cared for. In blended families, parents must avoid accidentally disinheriting their children. Without proper planning, assets left to a surviving spouse may never reach children from a previous marriage.
A sub-trust can solve this problem. It provides your spouse with income for life, maintaining the standard of living you both enjoyed. After your spouse passes away, the remaining assets automatically go to your children.
For families planning for retirement and asset protection, combining trusts with long-term care insurance alternatives or financial planning services for seniors can create a robust safety net for your loved ones.
