Whether it’s due to divorce or death, remarrying and adding a “step” to your family is a challenge at any stage in life. The challenge isn't just emotional; it can be financial as well. If you’re a grandparent who has found new love later in life — or if you’re becoming a grandparent for the first time by marrying into the role — congratulations are in order. But so is a little financial planning.
Consider the following example: One of my clients, a wealthy widower, recently remarried a woman of modest means. My client had been paying his grandchildren’s private-school tuition and funding their college accounts, despite the fact that his children could afford these things themselves. But now he has a new set of obligations and desires. He wants to spend his retirement traveling with his new bride, and he needs to make sure she’s provided for after his death. His kids, who envision their inheritance dwindling under the new arrangement, are furious with him — and none too taken with their new stepmom.
Another client of mine remarried 12 years after her husband’s death. Her new husband, also a widower, owns a valuable condominium in Chicago. That condo will become my client’s property once her husband passes away — and his own kids will likely have to wait much longer before they can sell it. I don’t know if they were counting on the money from the sale of that condo to fund their own children’s educations, but if so, I hope they have a back-up plan.
Those are just two scenarios in which the remarriage of a grandparent has had unintended financial consequences. The fact is, a new spouse — and his or her kids and grandkids — can turn a neatly drawn financial picture into a colorful mess. The arrival of a new, younger spouse can significantly delay a grown child’s inheritance; a new, aging spouse might have health problems requiring long-term care that could wipe out a lifetime of savings. And suddenly there might be six grandchildren whose 529 plans need funding, where before there were two.
What can you do to shield your family — and your finances?
• First, as soon as you know you’re going to remarry, begin a conversation with your kids (and grandkids, if they’re old enough) about how your new husband or wife will fit into your financial picture. If you’ve promised to pay for a major expense, such as a grandchild’s college tuition or first car, let him or her know whether that is something you’re still willing and able to do. (It should go without saying that, for the sake of family harmony, you should avoid reneging on these promises if at all possible.)
If you know your kids are counting on an inheritance that could be affected by their new stepparent, explain how things might change, or the steps you're taking to protect them. In the case of my male client, I recommended that he take out a generous life insurance policy that would provide for his new wife without taking any funds away from his current estate.
You don’t need to share exact dollar figures with your grown children, but simply reassuring them that you’ve taken the time to think these issues through can go a long way toward calming their fears — and engendering good will toward your new spouse.
• Sign a prenuptial agreement. Sure, it’s unromantic, but it can save you and your new spouse — and your families — a lot of heartache. No one wants to get into an Anna Nicole Smith-style legal battle over who gets what when one of you passes away. Sitting down with an estate-planning attorney before you remarry will force you to clearly work through these issues in advance. I tell my clients to look at it this way: Prenups provide the psychological reassurance of knowing that if someone gets hit by a bus, the money’s all going to go to the right places.
Taking care of these financial details beforehand can help set the stage for a happy marriage and a harmonious blending of families. And that’s one gift you can be sure your kids and grandkids will appreciate.
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