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I Do, Take Two

More than 200 years ago, the writer Samuel Johnson defined a second marriage as “the triumph of hope over experience.”

Numbers today bear him out.

Second marriages are more than 25 percent more likely to fail than firsts. And remarriages with children from prior unions are twice as likely to end in divorce as those without.

Yet, blended families have become the norm. According to statistics from the United States Census Bureau and American Demographics, more than 50 percent of U.S. families are re-coupled. More than 75 percent of those who divorce will marry again — and face a host of financial-planning challenges.

If you’re about to become part of a step-couple, you need a financial plan to:
• Protect children from your previous marriage
• Provide for your new spouse and any succeeding children
• Help fund your retirement
• Minimize financial risks
• Reduce your tax burden

“The success of your next marriage may depend on how thoroughly you cover money issues before marriage, manage money during your marriage and plan to disperse it after your death,” says Robin B. Randall, Trust Administrative Executive, Personal Financial Services Northern Trust – Tucson, Arizona.

Share your financial histories. Make sure you both reveal previous bankruptcies, credit issues or financial obligations. This includes sharing the terms of your divorces. You should know what provisions are likely to affect you now and in the future.

Agree on a budget. Negotiate a budget that reflects each spouse’s ability to pay and decide who will pay what in terms of household bills, education, retirement and estate planning.

Know the net worth of your intended. After you’re married, your spouse’s wealth will not only determine your standard of living, but will become a factor for your children from a prior marriage. If they apply for financial aid, for example, colleges will look at your joint household income.

Redo your will soon after remarrying. If you want your money to reach a specific target, say so in your will. Step-couples today often leave assets acquired during previous marriages to the children of those marriages and money acquired together to all members of the new stepfamily. Keep in mind that wills treat stepchildren, children and adopted children the same, unless specified otherwise.

Update all policies and documents. Want to leave all your money to your ex-husband or have your ex-wife decide whether to pull the plug if you’re on life support? If not, make sure you’ve updated all beneficiaries on your life insurance and retirement accounts. Don’t forget to update any guardians or trustees you’ve appointed.

Know when to separate...your portfolios. If you both have children from prior marriages and differing attitudes toward investing, keeping your portfolios separate may be advisable.

One common scenario is that each spouse controls investments acquired before the marriage but manages assets acquired together jointly, Randall says. Be sure to look at the whole picture, though, even if you keep money in separate accounts to avoid getting overly concentrated in one area.

Involve kids in investing. Randall suggests teaching children to save 10 percent to 20 percent of their allowances.

Preschool-age kids should save where they can see the money grow, like in a piggy bank. You can introduce bank accounts, checking accounts and mutual funds when they’re between 8 and 10. By their teens, children should be able to understand stocks and bonds.

Revisit and revise
“Your fortunes may wax and wane. You may have additional children. The circumstances of your previous children may change,” Randall says. So, revisit your financial plans often to see whether they still make sense to you, and perhaps, with hope and sound financial planning, your remarriage can triumph over experience.

Robin B. Randall is the Managing Executive of Northern Trust’s Tanque Verde office in Tucson, Arizona. Robin has specialized in Trust and Estate Planning for 18 years.  http://www.northerntrust.com/

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