Boomer Couples Can Encounter Financial Headaches

Getting married is always a financial adjustment, as any couple knows. When the bride and groom are baby boomers, it’s often more complicated--particularly if one or both are remarrying and have children.

Many boomers have financial obligations to previous spouses. Many are putting children through college. Many are looking after and perhaps supporting elderly parents. And often the new spouses have differing levels of wealth and different attitudes about spending and saving.

Financial planners say these issues actually aren’t the biggest problems facing engaged and remarried boomer couples--it’s not talking about money before it turns into conflict.

“They need to have the trust and willingness to say, ‘These are the things that are really important to me,”’ said Diahann Lassus, a certified financial planner in New Providence, N.J. “It’s all about communication and being able to talk to one another, which is a big issue for many people.”

If a couple doesn’t openly discuss finances, one or both spouses could run into some very unpleasant surprises.

“One of the things I find people don’t think about in remarriage is that life insurance or retirement funds often have been dedicated to the prior family” as part of a divorce agreement, said Ginita Wall, a certified financial planner in San Diego. And on the death of a former spouse, the ex-wife or ex-husband has a right to part of an individual retirement account, 401(k) plan and life insurance proceeds.

Estate planning can be another area of difficulty, especially if there are children from a previous marriage.

Violet Woodhouse, a Newport Beach attorney and financial planner, said couples struggle with the question, “How do we handle our responsibility to our own respective families and balance that with our responsibilities to our spouses?”

For example, some people who have remarried want to leave their homes to their children, but they also want to be sure their surviving spouses will have someplace to live. Often the surviving spouse is granted the right to live in the house for as long as he or she wants, but that means the children will have to wait for their money. Sounds simple, but in some families that might cause hard feelings.

Another issue involves how children should be treated when it comes to college education and estate planning. What if one spouse has more money than the other and doesn’t want to leave it to stepchildren? Will that lead to resentment and a family rift? What if the children of one spouse want to go to Ivy League schools while the others don’t have the grades and have to settle for state schools?

It’s not just family issues that need to be discussed. Engaged couples should find out whether their partners have big debts or tax liens against them, or whether they’ve ever declared bankruptcy.

Then there’s the question of spending philosophy, which, of course, is an issue at all points in life. Does one like to spend more than the other? Do both agree on how much to save?

Without up-front discussion, money--and all the emotional baggage tied to it--can dispel the euphoria of finding a mate.

Woodhouse suggests engaged couples fully disclose their finances to each other.

“They need to exchange tax returns for the last five years, exchange bank and check registers for the last three years, get copies of all credit reports and exchange those,” she said. “Married people should be doing this, too.”

Some planners say couples can avoid at least some problems by creating a prenuptial agreement that would spell out how money will be handled during the marriage and in the event of a divorce.

“What prenups do is they force us to deal up-front with these kinds of tough issues before they become a crisis in the marriage,” Woodhouse said. These agreements are “about clarity, about how we’re going to live, how we’re going to spend, how we’re going to save.”

Many couples shy away from prenuptial agreements because it’s unpleasant to think about the prospects of divorce when you’re in love and getting married. But they do offer protection when things go wrong.

Carole Cox, 58, a professor at Cal State Long Beach, credits a prenuptial agreement with saving her finances from complete disaster when her second marriage ended. She had plenty of debts from lawyer’s fees and a payment she had to give her husband.

But, she said of the agreement, “it did protect the house and my retirement.”

Moreover, it shielded the royalties she earned from textbooks she’d written.

“It’s a substantial amount of income I would have had to give him half of without the prenup,” she said.