Second marriage: your essential legal and financial checklist
A second marriage brings together not just the happy couple, but often children from previous relationships, a lifetime of accumulated assets and other financial commitments. To pave the way for a harmonious future, it’s vital that both parties carefully consider matters from a legal and financial perspective.
AJB Wealth’s Operations Manager, Nicky Mowat, recently married David, her partner of 10 years. Like many later-in-life newlyweds, both have adult children from previous relationships (pictured above with Nicky and David) plus property and other assets.
‘It’s made us think and talk about matters that are not always easy to discuss, i.e. money and death!’ she says. ‘I started looking to change my name and my heart sank at the amount of paperwork. However, this is a good opportunity to review everything.’
1. Revisit your wills and consider inheritance issues
When you marry, your existing will is revoked, unless written in anticipation of your marriage. This means you no longer have a valid will, and your estate would be dealt with under the rules of intestacy. In England and Wales, this means the first £322,000 passes to your spouse or civil partner, while the remainder is shared with children or other descendants. It’s vital to consider your wishes carefully and seek legal advice to ensure that any new will is clear and legally binding.
‘The main difficulty is likely to be how you’re going to share your assets between your respective children,’ says Bell. ‘Do you want to pass your wealth down to your own children and exclude your new husband or wife? Or will you view all your joint children as your children. That decision can be tricky.
‘A side letter, or a statement of reasons alongside your will, may be helpful in explaining your decisions and promote transparency within the family. Whatever you decide, it’s important to review your will on a regular basis.’
A professional adviser will help you construct a will to:
- Clearly state how you want your assets distributed
- Provide for your new spouse while safeguarding the interests of your children
- Appoint guardians for any minor children
2. Lasting powers of attorney
When preparing a will, it makes sense to consider setting up Lasting Power of Attorneys. This is a document appointing someone to make decisions for you if you are unable to do so.
3. Prenuptial and postnuptial agreements
People who remarry are more likely to take a pragmatic approach to protecting their assets. This is particularly true with inherited wealth, or where a family business or property may be at stake.
‘People go into their new relationships being a bit more financially savvy,’ says Bell.
A prenuptial agreement details how assets would be dealt with in the event of divorce. A postnuptial agreement is similar, but agreed after a couple have married or entered into the civil partnership. Both can protect future assets.
‘Pre and postnups are not yet legally binding documents, but they are persuasive to a court,’ explains Bell. ‘Case law demonstrates that if certain criteria are fulfilled, but the document ends up being challenged in court, then they have the best chance of being upheld. The judge can go behind the terms of the order if it’s seen as unfair and not going to meet a party’s needs.
‘People tend to think that once they get a solicitor then it’s very adversarial and you’re looking to go into battle. But with this kind of document, we’re working to create something that protects both parties in the future and is in the best interest of the family. It can be helpful to bring accountants and financial advisers into meetings.’
A prenup should be:
- Signed at least 28 days before the marriage
- Involve full disclosure of assets
- Both parties must have legal advice (and should not be under any duress to sign it)
- The terms must be fair and meet needs
4. How will you operate as a couple?
Consider the fundamentals. Not only whether you want to change your name, but do you want to merge your finances or to keep things largely separate, perhaps with a joint account for bills and particular projects?
‘It’s very much a personal decision and depends on the nature of the individuals and their circumstances,’ says Paul Willans, MD of AJB Wealth in Alresford. ‘Whatever approach you take, being open and honest should enable you to better plan for the future. And getting sound legal and financial advice at an early stage is extremely important.’
5. Financial planning and investment strategy for newly-weds
Getting married is likely to change your financial situation, so it’s important to take stock. A wealth or investment manager can help you maximise your joint assets, and ensure your affairs are arranged in a tax efficient way.
‘While marrying, in itself, can be tax-advantageous, it’s vital that you comprehensively review your new circumstances,’ says Willans. ‘That way, the rule of unintended consequences won’t catch you out.’
- Assess your situation: Review your combined financial position, taking into account assets, debts and future financial goals. Cashflow planning can help.
- Diversification: If you both have investment portfolios, consider merging them or rebalancing to ensure diversification and alignment with shared objectives. However, certain assets, such as ISAs will need to remain in individual names.
- Retirement Planning: Reassess your pension plans, ensuring they cater to both your needs and those of your beneficiaries. Notify pension providers of any changes in marital status. As your pension plans are outside of your estates, and not affected by your wills, you will have to notify your pension providers of any desired change to your beneficiaries, in the event of your death.
- Former spouses: If you receive spousal maintenance from a former spouse, remarriage automatically brings this payment to an end. The person paying should be informed.
6. Property ownership considerations
If you and your new spouse own properties separately or together:
- Discuss and decide on the type of ownership: Joint Tenancy or Tenancy in Common. The former ensures the surviving spouse automatically inherits the property, while the latter allows you to specify distinct shares, which can be beneficial for estate planning.
- Consider the implications of Capital Gains Tax (CGT) if you decide to sell any property post-wedding.
7. Review and update beneficiaries
From pension schemes to life insurance policies, you may wish to change your designated beneficiaries. Upon marriage, you might decide to allocate a portion to your new spouse, but it’s crucial to determine how this aligns with the needs of your children and previous commitments.
8. Review insurance policies
From health to car and home insurance, notify your insurers of your new marital status. Review the policies to ensure adequate coverage for your expanded family and assets.
9. Obtain multiple copies of your marriage certificate
While it might sound mundane, having multiple copies of your marriage certificate can simplify various administrative tasks, from updating your surname on documents to claiming spousal benefits.
10. Be open and honest in your second marriage
Above all, maintain open communication with your spouse. Discussing financial matters might not always be romantic, but it’s essential. Make sure you review your financial status, goals, and make any necessary adjustments on a regular basis.
Newly-wed bliss may feel more complicated second time around, but by being well informed and taking professional advice where needed, you lay a solid foundation for the marital journey ahead.
‘For the path of true love to run smooth, joined-up wealth management is essential,’ concludes Willans.
At AJB Wealth, our experienced and highly-qualified team is well placed to work with you, and your other professional advisers, to help you achieve financial efficiency and security. To arrange an initial consultation, please book a meeting, or call us on 01483 774 070.
Disclaimer: The views and opinions expressed in this article include third-party comment, which does not necessarily reflect the views and opinions of this company. We have made every effort to ensure that the information in this article is accurate and up-to-date, however, you should not rely on it and should take professional advice before reaching any decision. This company and the third-party commentators are not responsible for any damages that may arise from the use of the information in this article.