Prenups, plans can protect finances

Before tying knot again, address key financial issues with partner.

When American Meghan Markle marries Prince Harry in May, it will be the actress’s second marriage. It’s not uncommon these days for people in their 30s, 40s, or 50s to get remarried for a second or third time. According to the U.S. Census Bureau, 28 percent of Georgians who have been married have done so more than once.

Many of these couples have suffered through tough divorces and are excited to find someone to share their hopes and dreams for the rest of their lives. While Markle will have few financial concerns, others should address key financial issues before tying the knot again. The two key questions are how this will affect each person’s financial security and what happens with their assets after they pass away.

A prenup will help protect finances.

Unlike those married in their 20s, couples entering matrimony for the second or third time don’t have the time to make up for financial mistakes, such as high credit card bills or a failed business. Couples in their 40s and 50s are saving for retirement, and seniors who have stopped working and are living off of their nest eggs may not have the ability to earn enough money to rebuild their investment portfolios.

To prevent financial issues from derailing a new marriage, I often recommend these couples strongly consider signing a prenuptial agreement, especially if there is a significant difference in a couple’s financial health. This is a legal agreement which predetermines how the couple’s assets and income will be split in case of divorce, separation or death.

A “prenup” isn’t meant to question the couple’s relationship or their trust in each other. Instead, it is to protect each person’s assets and provide financial security in the new marriage.

If one person has substantial debt and the other has spent years building a nest egg for retirement, they may not see eye-to-eye on their financial future. Without a prenup, creditors can go after marital property, such as a car or house, even if only one spouse is the debtor. To avoid this situation, a person can place a limit on their debt liability.

In addition to prenups, it is important for widows or widowers to protect their financial security by understanding whether or not another marriage will change their current financial situation. For example, remarrying can change the terms of survivor retirement benefits, Social Security benefits or trust distributions from a deceased spouse’s estate plans.

Set up an estate plan.

An estate plan lays out how assets will be distributed after the death of each of the spouses in the new marriage. Most people have a plan in mind on how they want their assets distributed at death, and marrying again may change their objectives.

Blended families can create additional technical and emotional complexity, especially when there are children from previous marriages. An estate will answer the following questions:

■ Does each person want to leave their assets to their adult children at the time of their death?

■ Or are those assets needed to support the new spouse for the rest of their lives? If so, how can the adult children be assured they will inherit these assets after the death of the second person?

It’s important to get the estate plan in place before one of the new spouses dies. I’ve seen situations where the new couple and adult children from both sides get along fine until the death of the first spouse. At that point, relationships tend to break down quickly as the person that provided the “glue” is gone.

Additionally, in some cases the act of marriage can change some provisions of a person’s estate plans. In some states, surviving spouses have automatic claim to certain property after a spouse dies if there is not a prenup, and ERISA retirement plans require a spouse’s signature to change the beneficiary to a non-spouse.

While love drives the individuals, having a clear picture of the financial implications is important so that there are no surprises after they tie the knot. Working with a financial adviser to put in place a detailed plan, which may involve life insurance, trusts and meetings between family members, can often lead to an amicable solution – and a happy new marriage.

Annika Cushnie is a partner and wealth adviser at Brightworth, an Atlanta wealth management firm with more than $3 billion in assets under management.