Whether your first marriage ended in a difficult divorce, or an amicable one, hopefully you feel that you have learned a few things that may help make the next major commitment more successful. However, as hopeful as one may be, there may be even more to consider than just a healthy relationship. There are many financial considerations that even the most qualified divorce attorney may not be able, or licensed, to advise on. Key planning items may have been overlooked. Before you make the decision to enter into a new marriage it is crucial to consider your current beneficiaries, the legacy you want to leave to your children or grandchildren, and how you will allocate your other financial assets.
Qualified Domestic Relations Order
Once the court declared your first marriage dissolved, the next question to consider is if all the joint assets have also been dissolved. Retirement accounts are important now more than ever. Most standard divorce settlements usually award a portion of the retirement assets to your former spouse through what is known as a Qualified Domestic Relations Order, or a ‘QDRO’. The divorce decree also indicates who is responsible for making sure that the QDRO is filed with the appropriate administrator regarding the retirement plan and/or pension that has been awarded. If this has been neglected or overlooked, you may not have exclusive rights to your remaining assets. Before you enter a new union, be sure to have your previous divorce decree and all retirement accounts reviewed carefully.
Another often overlooked change is to that of the beneficiary on these such accounts. Should the unfortunate happen your retirement assets may default to your previous spouse. If that is not your current desire, you’ll want to make the necessary changes to the beneficiary on not only your retirement funds, but other accounts as well. Banking and all savings accounts, certificate of deposits, brokerage accounts, and annuities and life insurance policies are just some of the many items you will want to review and be sure to update with the proper beneficiary information. Regardless of any other legal document you may hold in the majority of cases, (when the two beneficiaries are different) it is the named beneficiary on those accounts that will receive the assets in the event of an untimely death.
Planning for your children’s future(s)
Throughout your children’s lives you plan everything from their first preschool to their high school electives, and then their choice for higher education. Depending on the stage of life your children are in, you may want to consider how much of their future you want to financially participate in going forward. Do you want to fully or partially fund their higher education? Would you like to help with their first home purchase? What about the ever increasing cost of weddings? If you and your new significant other have children from previous marriages and relationships, you will want to consider how you allocate funds that you would like to go toward their future financial obligations. Before your money becomes “our” money, be sure to chart a course that allows for your desire to help your children and/or grandchildren along the way.
Financial Assets: Yours, Mine, Ours ?
Once you settle the paperwork on beneficiaries, updating accounts, and planning for your children, what will you do with your monthly and yearly budgets? Will you chose to merge your living wages or plan to keep separate check books? How will joint spending affect your goals and your budget? It is important to have an open discussion about whether or not your assets will be combined or divided should one of you pass away during the marriage. Will you choose to save for new goals, vacations, or real estate? When will you choose to have your current estates evaluated and documents updated?
You may be unaware of how a previous divorce can affect the planning of a new union. There are many important items to review, decisions to be made, and discussions to be had. Before you start a new journey, be sure to reflect on the road you’ve taken thus far and use it to create a strong, new foundation for your future.
***This material was created for educational and informational purposes only and is not intended as tax, legal or investment advice.