Blog | March 21, 2014

The Second Marriage: Financial Considerations

If you are going through the divorce process the first thought after reading the title of my blog is “Never Again!” right?  I know it was for me and, in some ways, it’s true what they say, “You don’t know your spouse until you divorce them!!”  Some divorcees move forward, embracing their independence. I know I painted my bedroom pink…because I could!  But all that new freedom aside, it tends to be a couples world.  It’s also nice to share moments in your life with someone special so, for me, I recanted my “Never Again” and did it a second time.

Now it gets complicated, for sure.  We each had our children with our first spouses so there’s that to consider.  So, if my husband and I owned our home jointly then if I died my half would revert to him.  My husband could then go out an find a new mate and enjoy all the fruits of my labour with his new spouse.  My kids?  They would get nothing.  See how this works?  So what can you do to help prevent your dying wishes from going awry?   Consider the following:

1) A prenuptial agreement.  Some say it make a business out of a loving relationship but I think just the opposite.  It protects each of your family’s wishes, their kids and yours, and sets the stage for a well thought out transition of wealth plan that is, hopefully, agreeable to both of you.  This may stop future feuding once the initial feelings of love and relationship newness wear off and you start to feel that, perhaps, the relationship is a little unfair, leading to potential resentment and chaos.

2)  Own your home as tenants in common, rather than joint tenants, based on a percentage of what each of you put into the equity of the home.  I think, though, in terms of fairness, anything you both work on together, while married should be split 50/50.  I believe family law would support this as well.  Keep in mind that if your wealth is so lop-sided that, if you pass away, your spouse would be homeless, that might cause an issue.  There are financial solutions available such as purchasing a life insurance policy to offset any deficiencies in providing reasonable housing for the surviving spouse.

3)  Did you know that when you say, “I do”, “I will” or whatever acknowledgement of entering a marriage contract is deemed appropriate for you, that your Will is null and void?  Yes, you have to renew your Will.  Funny thing is, I tried to renew my Will just days before my wedding and I couldn’t do it.  Not really but sort of….I had a temporary Will that stating…”In anticipation of marriage I intend my new Will to state…..” and then we formally re-did it when I returned from my honeymoon.  Needless to say, I avoided that sky-jumping opportunity, on my honeymoon, when it presented itself.

4) Check the beneficiaries of your registered plans.  Remember that RRSP’s and the like, transfer to a spouse tax-free on first death but they are taxed to anyone else you many want to bequeath…such as your children.  Lastly, on this note, depending on how your Will is written, if you leave your RRSP assets to your children your Estate pays the tax which could be as high as 46.41%, or roughly half, and the kids get the full value of the RRSP.

I advocate that a well-thought out plan can save many years of potential resentment and put you both on a fair playing field right from the get-go….so you can enjoy the feeling of being protected, financially, for you and future generations.

My advice?  Have a well thought out plan before you stroll down the isle.  It may save years of grief if you don’t…and it will set you on a good path to enjoy your new marriage.

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