Prenuptuial agreements may prevent financial disagreements

According to smartmoney.com, money is one of the leading causes of divorce, and overcoming the obstacles can be challenging.

A person entering a second marriage may have a more complicated financial situation: pre-existing debt, established spending or budgeting habits, and possibly financial obligations to their ex-spouse and/or children. For these reasons, it is crucial to take steps to help secure your financial future before you say, “I do” to a new spouse. Consider employing the strategies listed below to help ease your financial transition into a second marriage.

• Be clear about financial plans and goals. Communicate openly and honestly with your partner about your financial situation. Maybe you didn’t have many assets at the time of your first marriage, but chances are you now have a house, retirement savings and investment earnings. You should approach this union with an attitude of full disclosure – of your assets as well as your debt.

You and your spouse should be knowledgeable of each other’s salary, debts, financial obligations, loans, savings and credit status. You’ll also want to be aware of your future mate’s spending habits and savings goals.

• Set yourself up to succeed. An element of financial freedom is important in any marriage, but it can be critical for people who may be used to some financial independence.

For couples entering into a second marriage, especially if one or both people have spousal and/or child support payments, it may make sense to establish three different checking accounts: yours, mine and ours. Each person contributes a set amount into the joint account to pay for common bills such as the mortgage and utilities. Individual expenses, including child support, alimony and loan payments, would come out of the separate accounts. Financial struggles are often more about power and insecurity than they are about money. Allowing each person financial freedom and control over his/her money may prove to minimize conflict and resentment within the marriage.

You also may want to investigate filing your taxes as “married, filing separately,” especially if one partner is still connected financially with a former spouse. Since filing as “married, filing separately” may increase your tax bill, be sure to consult with a tax professional to determine the most appropriate choice for your personal situation.

• Get your papers in order before the wedding. Before you hire the band or interview the photographer, it is essential that you review your legal and estate plans. Discuss such things as beneficiaries, wills, life insurance policies and retirement accounts, make a checklist, and complete the tasks on it as quickly as possible after the legal event has been completed.

Consider discussing your wishes with your children. They may be more accepting of your new marriage if they know you have made provisions for how your prior assets will be distributed in the event of your death.

• Consider a prenuptial agreement. The act of creating a prenuptial agreement forces a couple to engage in honest communication and conduct a thorough inventory of all assets and financial responsibilities. The greatest benefit of this type of document is that it can prevent arguments over debts, assets and financial contributions to the marriage. A well- thought-out agreement can save a significant amount of money and heartache in the future. Laws pertaining to prenuptial agreements vary from state to state, so contact a family law attorney in your area to develop a customized plan.

If you need help integrating your finances with your future spouse, consider consulting a professional financial adviser. A qualified adviser can ask the tough questions and help you develop a financial plan that helps meets your goals for the future. The good news is that with careful planning and open communication, a couple can work thorough their money issues and financial disagreements.

Paula Dougherty, CFP®, ChFC, CLU, is a certified financial planner with Ameriprise Financial in Springfield. She can be reached at paula.j.dougherty@ampf.com or ameriprise.com.