We all know the numbers: 40% to 50% of first marriages end in divorce, according to the American Psychological Association. The divorce rate for second marriages is even higher — closer to 70%, and people over age 50 make up more than 25% of divorces in the U.S.
However, 80% of the people who divorce remarry, according to the Pew Research Center, especially those aged 55 and older.
Things tend to be more complicated after that first marriage. People are older and, in many cases, there are children brought to the marriage by one or both new spouses. Here are seven things financial advisors and lawyers recommend doing before taking that second trip down the aisle.
— Talk with your partner about money and finances.
— Prepare a prenuptial agreement.
— Review your Social Security benefits.
— Check your beneficiary designations.
— Discuss long-term care insurance.
— Protect your assets in a trust.
— Make sure you have an up-to-date estate plan.
Talk With Your Partner About Money and Finances
“This is something we’re bumping into more often. The thing that we tell people is that first and foremost, you have to have a very serious adult conversation about family and about money,” says Robert Gilliland, managing director and senior wealth advisor at Concenture Wealth Management in Houston, Texas.
Gilliland says the key in this situation is having serious conversations and being really honest “about what you want to happen with the assets that you’re bringing in. Because most of the time it’s not an ‘all the kids become our kids’ type of situation.”
Gilliland says the couple should sit down with both a financial planner and an estate attorney to help sort out these details.
[READ: Signs of Financial Abuse in Marriage.]
Prepare a Prenuptial Agreement
It’s critically important for folks beginning a second, third or fourth marriage to have a prenuptial agreement in place, says Ann-Margaret Carrozza, a New York City-based asset protection attorney and author of “Love & Money: Protecting Yourself from Angry Exes, Wacky Relatives, Con Artists and Inner Demons.”
“We’re dealing with folks who are a few years older than they were the first time around,” Carrozza says. “They will have fewer years to earn enough money to take themselves out of a financial hole in the event that they’re financially devastated in a divorce. So, for older people, they should really think long and hard about the advisability of protecting themselves so that their security is preserved in the event that the marriage does not work out.”
Gilliland says a prenuptial agreement is especially important if the two new spouses are not financial equals.
“You have to have a real serious adult conversation around whether or not a prenuptial agreement is something that should be considered,” Gilliland says. “I realize that when you are in the process of getting married it’s all exciting, and you don’t think that you need anything like that, but you need to be aware to protect yourself in both situations.”
Review Your Social Security Benefits
If you are divorced, you are entitled to your ex-spouse’s benefits as long as you were married 10 years, Gilliland says.
However, “if you get remarried, you could end up losing those benefits. You need to check out your Social Security benefits,” he says.
Check Your Beneficiary Designations
Both partners need to check beneficiary designations on all accounts, including IRAs, 401(k)s and pensions.
Gilliland said he is currently working with a client whose ex-husband passed away, and she inherited 50% of his IRA because he never changed the beneficiary. The kids received 25% each. No one is sure if that was his intention.
Consider Long-Term Care Insurance
Since people are generally older when they enter their second or third marriage, the couple should think about long-term care costs, Carrozza says.
“With marriage in all 50 states comes a legal responsibility to cover the costs of each other’s long-term care,” she says. “And depending upon what part of the country you’re in, we can be looking at monthly expenses of over $15,000.”
Carrozza advises that the parties disclose to each other what their long-term care plans are.
“Do they have long-term care insurance? And we also want to protect assets from long-term care claims that arise on behalf of the other spouse,” she adds.
[READ: States With Estate and Inheritance Taxes.]
Protect Your Assets in a Trust
Carrozza says you should look into protecting real estate and possibly other assets through the use of a trust.
“We want to avoid probate because the probate of a will can potentially pit our spouse against our adult children,” she says. “Whereas with a trust the named beneficiaries take the assets immediately without court oversight and it’s very smooth.”
Make Sure You Have an Up-to-Date Estate Plan
One of the biggest problems that happens in marriages that go the distance is that one spouse dies and the other has difficult decisions to make on their joint estate ahead of moving onto a new relationship.
“And when we’re dealing with a second marriage, chances are pretty high that each of the spouses have children from other relationships,” Carrozza says. “So, if we want to avoid World War III, a second marriage requires that the parties engage in some nuanced estate planning.”
One big question that comes in this scenario is who will get the house upon the death of the remaining spouse: the new, surviving spouse who has entered the picture, or the children of the original marriage?
Carrozza says the planning must balance the needs of both the spouse and children. The typical compromise is the surviving spouse has lifetime rights to the house, but this situation can be fraught with problems.
“I’ve had clients where the spouse gets to an age where they have to be in a nursing facility,” she says. “And now that person is not in the house. But because they’re technically alive, the adult children are not even allowed to enter the house.”
She recommends that the estate plan stipulate that the new spouse can occupy the home until “death, voluntary departure or permanent stay in a nursing facility. ”
“And if I really want to be a control freak, I can also say his right to be in the house ends upon his cohabitation, or remarriage with another person,” Carrozza says.
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