We’ve talked about estate planning on the blog before. But if you’re a divorcee that’s approaching retirement age and are thinking about tying the knot again, there are specific considerations to be aware of.
Here are six things to think about when creating an estate plan with your soon-to-be spouse:
1. Talk to each other!
Good communication is essential when discussing estate planning with your partner. This is doubly true if either of you has an ex-spouse or children from previous marriages.
Some divorce decrees require an ex-spouse to be named as a retirement plan beneficiary. If so, make sure your estate plan accounts for this. You should also consider how you want to provide for your children (including those from previous marriages, shared children, and stepchildren).
2. Review your assets together and figure out who owns what.
When there’s no clear answer on ownership, you’ll have to choose whether to commingle it or keep it separate. There’s no single best way to do this – it all depends on your situation, especially if one half of the couple has significantly more wealth than the other.
Whether or not both partners have biological children with previous spouses may also determine ownership of assets.
There is also the question of what the law says. Divorce laws vary by state, but if you live in a community property state, remember that just about anything acquired over the course of the marriage is viewed as equally owned by the couple.
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3. Check all beneficiary designations on retirement plans and insurance policies.
Make sure the named beneficiaries on each account truly reflect your wishes. Many people don’t realize that beneficiary designations on IRAs and 401(k) plans override will instructions. Be sure to periodically review your beneficiary designations on each account and update as needed.
4. Create advance directives for your finances and your healthcare.
Giving someone financial power of attorney will allow them to handle your bills and file your taxes. A healthcare proxy (or medical power of attorney) may make critical decisions regarding your health if you become disabled or incompetent.
These don’t have to be the same person and some experts argue that these roles should be separated among multiple people.
5. Consider a prenuptial agreement.
Prenups are more common than they used to be. If you’re coming into a marriage with assets and liabilities accrued over your life (as well as children from your first marriage), it may seem like common sense to get a prenup.
Many people want to leave money to their biological children and a prenup can help ensure that happens. An estate plan may be changed at any time without a prenup to cement it.
6. Partner with a financial advisor
Developing a good estate plan can be hard enough for individuals and couples in first marriages. Divorce and children from previous marriages makes the undertaking even more complex.
That’s why it’s best to work with an experienced financial advisor that can help guide you and your future spouse through the process. A professional estate plan will help both of you be more comfortable about the future while adding protection for your assets.