Love & Money: The Second Time Around

Updated on January 9, 2007.

MONEY ISSUES CAN can cause serious problems in any relationship, but the financial issues in a second marriage are often the hardest to deal with. That's because the marriage itself is more complicated: Often you're dealing with blended families (i.e., children from both the first and second marriage); the married couple is also more likely to enter the marriage with substantial assets (or perhaps heftier debts); and chances are there's some leftover resentment from the first marriage — which probably deteriorated at least in part over money issues.

"[Finances] can be even more of a problem in a second marriage than they are in the first," says Patricia Schiff Estess, author of "Money Advice for Your Successful Remarriage." And sadly, it doesn't appear that folks are any more likely to get it right the second time than they were the first. Indeed, the experts I spoke with were full of anecdotes of how money can wreak havoc in a second marriage. One financial planner even told me about a husband who became so obsessed with the money he was spending on the children from his wife's first marriage that he started to track their expenses — right down to the number of doughnuts they'd bought.

And so, I decided to speak to some pros about how to get the finances right the second time around. This might not seem terribly romantic, but communication about money "is more important than communicating about sex," says Bach. In other words, resolving these issues just might allow you to focus on...more enjoyable pursuits.

Talking Money
One thing couples often have going for them the second time around is that they tend to be savvier about money — and they understand the significance it can have in a marriage, says Bach. That's good, since the experts agree: Financial honesty is critical.

"You need to know the financial facts," says Estess. "And that means knowing your future spouse's legal and moral obligations." Before you marry, you should discuss child-support payments (or alimony payments), come clean with any debts you may have and talk about your goals — both as a couple and (if appropriate) as a parent to the children in your first marriage. You should also know what assets your future spouse will bring to the marriage, and how they might be used (i.e., to buy a new home or to pay Dartmouth tuition for a child from a previous marriage). And you should talk about how expenses will be handled. If both couples work, some choose to pay expenses based on a ratio, so each partner is contributing the same percentage of their salary to a certain goal or debt. A sense of financial fairness can be very important in a second marriage, says Estess.

Of course, as any financial planner will tell you, money issues are ultimately rarely about money. Instead, they're typically rooted in issues of power, control, insecurity, freedom and love, notes Marianne Shine, a certified financial planner (CFP) at Shine Financial. Regularly discussing financial issues in a calm environment is the best way to keep money problems from seeping into other corners of your relationship.

The Prenup
Given the complexities of second marriages, a prenuptial agreement can often make sense. But some couples still shy away from them, uncertain of how to broach the subject delicately. To resolve that problem, some say all that's needed is an attitude adjustment. "Prenuptial agreements are like a seatbelt," says Bach. "You don't get in a car, put on a seatbelt and expect to get in a car accident. You put on a seatbelt in case of a car accident."

When can a prenup make sense? The most common scenario is if one or both spouses are coming into the marriage with significant assets (or a small business). Prenups can also be helpful if one spouse is expecting an inheritance or if one partner will be giving up his or her career to raise a second family, says Jennifer Openshaw, founder of the Women's Financial Network.

But perhaps more important, a prenup can also be a tool to make sure that children from a previous marriage are provided for when a parent dies, says certified financial planner Ginita Wall, author of the booklet "Love and Money: 150 Financial Tips for Couples." While a will may be contested, a prenup that backs up the provisions of the will can make it far more difficult to fight, since it proves that the will's contents were agreed to by both spouses.

That said, in order for a prenup to stand up in court, it needs to be handled properly. For starters, both you and your soon-to-be spouse should have legal representation, notes Openshaw. Also, you can't spring a prenup on someone the night before the wedding: The paperwork can't be signed by someone who might be feeling pressured or coerced. And, sorry, you also can't lie about your financial situation.

Planning the Estate
Regardless of whether you and your spouse decide to use prenuptial agreements, it's essential that you review your estate plans once you remarry. Wills should be updated and beneficiaries should be changed (if appropriate) on life-insurance policies and retirement accounts. It's extremely important that the proper paperwork be filed — otherwise you could run into a situation where a spouse inherits much or even all of the estate, which could then be distributed however he or she sees fit. That's fine if that's what you want, but clearly a problem if you had other intentions for your assets, notes Wall.

Trusts can also be created to make sure that children are provided for properly. This gets awfully tricky awfully fast, but a common strategy used by couples is to set up what's known as an A-B trust. This is actually two trusts, with A trust taking advantage of the federal estate-tax exemption, which these days is $2 million explains estate-planning attorney Eric Strulowitz, a partner at Zeller and Strulowitz. This money you typically earmark for your kids. The second trust — the B trust — can then be set up as a so-called QTIP trust, under which when one spouse dies, the surviving spouse receives income from the trust, but when that spouse dies, the remaining balance is then transferred to the children. (Have I lost you? Click here for a more detailed explanation.)

Clearly, when dealing with issues like trusts and prenups, you need to get yourself a good lawyer. But many experts I spoke with said that any couple looking to remarry might also want to consider talking to a financial planner, which might defuse some of the emotion that's tied up with these issues. The good news is while there will inevitably be many bumps along this road, it's indeed possible to work through these problems, notes Estess, who remarried 25 years ago. After all, if you're willing to make this bold move once again, it's probably about a lot more than just money.