What to Consider When Combining Finances in a Second Marriage

The decision of whether and how to meld your family finances after you get married is an important one—and it can become more complicated if you’re marrying for a second time. It’s a common situation in the U.S., with remarriage accounting for 40% of all marriages, according to research from the Pew Center. And the blending of finances if one spouse or both spouses have been married before merits a little extra attention.

As you build a budget for your new household, make these smart money moves to put your new relationship and blended family on a path to financial wellness.

Discuss Financial Obligations to Children or Previous Spouses

Sit down together and review any expenses and responsibilities each partner has in terms of child support and/or spousal support from a previous relationship. Discuss how these expenses fit into your new household budget and get a handle of any timelines for when they may change. For example, individuals typically only pay spousal support for a set number of years—often determined as a percentage of the length of the marriage.

If you’re blending finances, explore how each person feels about contributing to existing obligations. There’s no right answer for who pays for what or what each spouse or family should do. However, discussing these issues early can help you avoid marital issues in the future.

Review and Update Insurance Policies

With a new marriage pending, now is a good time to evaluate all of your insurance policies—from home to car to life insurance. Pay special attention to who is listed as a beneficiary on life insurance policies, especially if you purchased them during your previous marriage. You may want to update the beneficiary designation to your new spouse or direct the funds to your children.

Also, look at your car and home insurance. Add your spouse to the policies, update addresses and take the time to review whether the coverage still makes sense. For instance, if you’ve combined families and added a few more teenage drivers, you’ll want your insurance policy to reflect that.

Refresh Your Estate Plan

If you or your spouse are marrying for a second or third time, then significant portions of your estate plan will need to be updated. As with your insurance policies, you’ll want to update your will and ensure that you’ve planned for your children’s inheritance. You may want to establish a trust that directs funds to your children from a previous marriage—or do the same for your new partner’s kids.

Consider the scenario in which one spouse passes away and the other inherits money and property. When the second spouse dies, the children of the first spouse aren’t usually entitled to inherit anything—unless it’s been pre-designated. There are many, many ways to address this, but the bottom line: Your estate plan becomes more complicated and you want to make sure you plan for what you want and avoid unintended consequences.

Evaluate Your Retirement Savings

If you or your spouse was previously married and then divorced, there’s a high chance that the split impacted retirement savings. In many cases, spouses end up divvying up workplace retirement plans and other savings vehicles. As you enter into a new marriage, evaluate whether your retirement savings remain on track or if you need to focus on rebuilding some lost nest egg.

Also, discuss whether your retirement plans will change given your new partner’s plans. You may end up moving somewhere else, working longer or even trying to retire earlier, depending on the age and work situation of your spouse. Discuss your future plans and create a new savings plan that allows you to achieve your joint retirement goals.

Be Aware of Financial Aid Impacts

If you have a child in college or one headed there, then your new marriage can impact his or her financial aid. That’s because FAFSA accounts for the household income of the child’s primary custodian. So if you’ve remarried and have custody of your kids, then your new spouse’s income becomes part of the college financial aid picture.

It’s very important that blended families are aware of how their new financial situation impacts aid their child may be receiving. FAFSA considers the step-parent's income, even if a couple has signed a prenuptial agreement or the step-parent doesn’t plan on contributing to a child’s college expenses.

Blending families is an exciting—and sometimes complicated—times. Have frank discussions about your combined financial means, needs, and goals, and you'll prevent small issues from becoming bigger problems in the future.