Together or Separate? It’s Complicated!

Together or Separate? It’s Complicated!

Love is a beautiful thing and weddings can be the most spectacular events. Unfortunately, love and weddings do not always lead to a marriage that ends happily ever after. In fact, statistics show that 40% – 50% of first marriages in the U.S., 60% of second marriages in the U.S., and 70% of third marriages in the U.S. end in divorce. To top it off money is the second leading cause of divorce in the U.S. With statistics like that is seems like you should hold on to your money and stay as far away from marriage as possible. That is not necessarily the case – there is hope.

Typically in first marriages both parties come together with little money and/or lots of debt. In fact, arguments about money are usually centered around the lack of money instead of an abundance of it. Since opposites attract, usually one spouse spends more while the other focuses on saving and paying the bills. Many can make it work but statistics show that many cannot seem to figure out how to make it work. For those couples, “Love and Money Do Not Mix Well”, as I wrote here.

When it does not work the first time, for whatever reason, hopefully those who remarry have learned a valuable lesson. Especially, as it relates to money. However, the new spouse is a different person and some look at remarriage as a fresh start. Since it is new, there can be many questions about how to handle money. Should we have separate accounts or joint accounts? If I trust him/her enough to marry them, shouldn’t I trust him/her with my/our money? Love and trust are important but money adds a whole new dynamic. Money can make people do strange things. Even people who profess their love enough to put a ring on it. So, what should you do?

Here are some tips to protect you and your money and to, hopefully, keep the happy in your second or third marriage:

  1. Be up front and honest about each other’s finances. Discuss and disclose any past financial issues and challenges. This may not be a deal breaker but could be very helpful in determining how you proceed with your wedding or in your marriage.
  2. Craft a prenuptial agreement. Some people say that a prenuptial agreement takes the romance out of a marriage. Those people probably do not have anything to lose. With the probability of divorce being so high it only makes sense to protect yourself instead of risking any and all assets you acquired before marriage in a divorce. Or being stuck with the burden of your ex-spouse’s debt.
  3. Keep your assets separate. You both came into the marriage with your own assets. Many couples choose to open a joint checking account to pay bills and major expenses. While they have separate checking and/or savings accounts for “their” money. Many individuals come into second and third marriages with property. There is no need to put your new spouse’s name on the property. Also, be careful about signing on the dotted line regarding debt. You may need to be joint signers on the mortgage of your primary residence but it is not necessary for car purchases or credit cards.
  4. Revise your will. Not only do you want to make sure your ex-spouse is no longer the beneficiary, if that was the case, but you also want to make it clear how proceeds are distributed concerning your new spouse. If you have children and/or grandchildren, they may become the primary beneficiaries.
  5. Consider retirement plan rights. Your new spouse may have rights to your retirement proceeds but only the amount accumulated since your marriage. You may have to prove what you accumulated before your marriage, so it is important to have a copy of your statement(s) from the date you got married.

Before you make any decisions, there are a few things to consider. First, it is important to know whether you live in a common law state or a community property state. This will determine how assets are divided after a divorce according to the law. After finding out, it is important to meet with a lawyer and/or your tax adviser to answer any questions you have and to make sure you properly protect your assets. Finally, there is not one way that works for everyone because every situation is different. Also, you can always change your mind. However, no matter what your situation, please go in with your eyes open and not just your heart. All the best!

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