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Q: How are your financial concerns in a second marriage different? A: "You're going to be more self-sufficient, more experienced. You may have a more sizeable salary and more accumulated assets, not to mention children from your previous marriage. So you'll need to protect those assets and be sure to remain independent."
Q: What's the biggest mistake women make? A: "In my experience, it's letting their new husband handle all the finances. This can even happen with successful businesswomen. They lose the independence they once had, and are now back in the dependent mode."
Q: So how do you get the best start? A: "By talking and planning with your fiance -- well before you get married -- how you will pay for joint expenses and where savings will be kept. You should also draw up legal documents such as wills, trusts, and prenuptial agreements that outline how assets will be protected for you and your children upon death or divorce. Also find out how finances were handled in his last marriage, as this can be very telling."
Q: How do you bring this up? A: "Say, 'We're going to have a financial exchange. We'll exchange net-worth statements, credit reports, and credit-card bills, what we owe and what we earn. And we'll create a budget together.' Write out your expectations and have him write his, then swap them. It's good for you to have this on paper, because you're figuring it out for yourself."
Q: What if you suspect your fiance is hiding something? A: "Ask him point-blank if he has told you everything. If you still get the feeling that he's hiding something, you should think twice about marrying him. You could hire a private detective to check into his financial situation -- prospective employers sometimes do this. Telling him that you intend to do this may be enough to make him come clean. If it turns out that he is hiding something, ask why. Is he simply embarrassed about some debts, and the situation can be resolved? Did he grow up in a household where no one talked about finances? If he still hesitates to tell all, don't marry him."
Q: Is it a good idea to pool your money? A: "Most of my clients in second marriages maintain separate earnings and checking accounts. It's both practical and easier for record-keeping purposes. Each spouse contributes to a joint household account to pay the everyday bills, or they decide who will pay for which bills from their own account. It especially makes sense to keep money separate if alimony or child support is going in or out. Child support, in particular, is meant for very specific purposes; it's important to keep track of where the money is going. If you are paying alimony or child support, it should come out of your personal accounts. Sharing your life with someone doesn't mean you can or should share all your assets. For example, company retirement plans and IRAs legally must remain in one individual's name. College savings accounts for children should also be kept separate, as often the noncustodial parent is sharing in these costs. "Realistically, all of this depends on your level of assets and income. Joint accounts may be just fine if neither of you has significant assets, or if neither of you is getting support from a noncustodial parent and you agree to share the costs of any children."
Q: If you have kids from your first marriage, should your new husband help pay their expenses? A: "That's a very personal decision. Often, as families grow comfortable with each other, the new husband will naturally start pitching in for your children's expenses. If there's a noncustodial parent somewhere paying support, your new husband may not need to pay your children's expenses. If the noncustodial parent isn't paying support and you expect the new stepparent to ante up, you should talk about it up front."
Q: Is a prenup really necessary? A: "I'm a fan of prenuptial agreements, especially in a second marriage. I know women who say they'd never marry someone who wants them to sign a prenup -- but why not? If you have significant assets of your own, you need to protect them, and you should insist on a prenup. Look, half of all marriages end in divorce. Marriage isn't just love and emotions, it's also a business partnership meant to support a couple and a family. Would you go into any other financial partnership without written agreements? Prenups are most important in families with unequal assets, but if either side has children from prior marriages, a prenup will help eliminate issues of inheritance."
Q: What should a prenup cover? A: "All of the financial issues: assets, property rights, support obligations. Prenups should address your individual investment accounts, home and personal assets, company retirement accounts, IRAs and stock options. If one of you has rights to future income from earnings from a patent, copyright or trademark, or royalty agreements, the rights need to be protected. Address insurance coverage, especially medical. A prenup protects the family that has the assets, but it also protects the dependent partner in the event of a divorce."
Q: Are you responsible for your fiance's debt once you're married? A: "No. And don't assume it. I would encourage everyone to pay their debts off before they get into a marriage, except for the mortgage, if you're going to stay in that house. But credit cards, car loans -- get them paid off, if possible, so they're not an issue between the two of you. Do not cosign on any of your partner's old debts; creditors can come after you if they don't get paid. Be careful about opening joint credit-card accounts. You will be fully responsible for paying the entire debt if your husband can't swing it. If you have separate credit cards and your new husband racks up lots of charges, he alone will be responsible for paying and it shouldn't affect your credit rating. Also, make sure your credit cards with your former spouse have been canceled. Some people just hand them off to their ex without taking their name off the account, which means they're still responsible. "One of the largest debts is generally a mortgage. If you are moving into your spouse's home, I recommend that you do not add your name to the mortgage. You can agree that you will pay a portion of the mortgage payments, but you need to see those as a monthly expense, more like rent, because you won't be able to claim them in the event of a divorce. If you add your name to the mortgage and your new husband then decides he won't pay, you will be fully responsible. If you buy a new home together, most likely you will both sign on the mortgage, but do not put your name on the mortgage unless it's also on the title to the house."
Q: What else should couples do? A: "Look at your insurance needs. Both of you need medical insurance, so see which one of your employers offers a better program. Make sure the kids are covered, and determine who will pay for that. Make sure you have life insurance with the appropriate beneficiaries. Don't overlook disability insurance. Decide whether you're going to keep separate financial advisers, such as your CPA, which may be smart if your tax situation is complex. Otherwise, it will be easier for one CPA to give you the best advice, because he or she can see the entire picture. Ask your tax adviser if you should file joint or separate tax returns. One of the disadvantages of filing jointly is the 'marriage penalty.' Many people move into a higher tax bracket when they get married and combine incomes. The only way to know which is better is to have a pro forma, or practice, tax return prepared by your CPA. Keep in mind that if you file joint returns, you become liable for the information that is reported or not reported. If you or your husband have complicated returns, you may not want to take responsibility for the other's information."
This month's expert: Connie Brezik is a Certified Public Accountant and Personal Financial Specialist, and president of Asset Strategies, Inc., an investment-management and financial-planning firm with offices countrywide. She was interviewed by Janine Latus.