Remarriage: Altering Your Financial Plan to Meet Your Needs
In previous generations, men traditionally handled the family finances. While this arrangement may have worked well during the husband’s lifetime, the consequences of the wife’s lack of involvement in the family’s finances often became clear after her husband died. Today, more women are actively directing the outcome of their personal finances, and for good reason.
Women need to plan for a time when they may be on their own. Through divorce, widowhood, or personal choice, the odds are high that a woman will be independent at some point in her lifetime. Financial planning is essential for women throughout life, but it becomes especially important in the event of remarriage, as financial arrangements may need to be made for ex-spouses and children.
If you are in a second marriage or about to remarry, you may want to consider the following important points about managing your personal finances:
Bank Accounts. Sharing joint accounts may help to dissolve any mysteries about where and how family income is spent. Many couples decide to split expenses evenly, but seriously consider having the higher wage earner pay the larger portion of the bills.
Prior Debt. Will each spouse be responsible for the other’s debt incurred before the marriage, and if so, to what extent? Keeping the indebted spouse’s prior debt separate will help ensure the other spouse’s property remains out of reach of creditors.
Property Acquired before Remarriage. Owning previously acquired property in your own name can prevent the risk of losing personal property to your spouse’s potential creditors. Also, doing so may have estate tax benefits. In 2013, estates valued in excess of $5.25 million may be taxed as high as 40%. Every individual may exclude up to $5.25 million from estate taxes in 2013. Keeping your own property in your own name can help ensure that you minimize estate taxes while providing an inheritance for children from a previous marriage.
Home Ownership. The majority of couples choose to title property jointly as tenants by entirety. When one spouse dies, the home passes to the surviving spouse tax-free. When the surviving spouse dies, up to $5.25 million may be protected from taxation in 2013.
Retirement. Saving enough for retirement is a major financial objective for married couples, and women have unique concerns when considering this goal. First, women typically live longer than men, so their retirement funds need to last longer. In addition, women often spend more time out of the workforce than men as a result of caregiving responsibilities, and because of this, they are less likely to have pensions and full Social Security benefits. The gap between gender incomes makes it especially important for women to prepare for retirement.
Insurance. Disability income insurance can provide financial protection in the event you or your spouse are unable to work because of an accident or an illness. These policies can ensure that funds for bills and expenses will continue to be available. Similarly, life insurance can provide a measure of financial security upon death. Life insurance can help ensure that children from a prior or current marriage will have the funds to attend college, the mortgage will continue to be paid, and the surviving spouse will have some replacement income.
Estate Planning. Blended families have unique estate concerns, so it is important to plan for the final disposition of your assets. Trusts can be a valuable tool to minimize estate taxes and to help ensure that your assets are distributed to your heirs according to your wishes. For example, at death your assets can pass to a trust, from which your surviving spouse will receive income without access to the assets themselves. At the death of the surviving spouse, the assets can then pass to children from your current or previous marriage. This gives the surviving spouse financial security and provides an inheritance for your children as well. In addition, if the surviving spouse later remarries, the trust precludes your assets from their marital or community property.
Anyone who remarries needs to balance his or her financial past with the financial future. By addressing financial strategies as soon as possible, you can avoid disputes and build financial security for your extended and blended families.
The information contained in this article is for general use and while we believe all in formation to be reliable and accurate, it is important to remember individual situations may be entirely different. Therefore, information should be relied upon only when coordinated with professional tax and financial advice. Neither the information presented nor any opinion expressed constitutes a representation by us or a solicitation of the purchase or sale of any insurance or securities products and services. Written and published by Liberty Publishing, Inc. Copyright © 2013 Liberty Publishing, Inc. PFWREMRG-04
The information provided is not written or intended as specific tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. MassMutual, its employees and representatives are not authorized to give tax or legal advice. Individuals are encouraged to seek advice from their own tax or legal counsel. Individuals involved in the estate planning process should work with an estate planning team, including their own personal legal or tax counsel.
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