Achieving financial bliss in a second marriage
via Morningstar | July 12, 2011
When Kathryn Jankowski re-married, it was with eyes wide open. The vice-president and financial divorce specialist at T.E. Wealth in Toronto was going into her second marriage with two children, and with the financial hindsight of three decades. “In my scenario,” says Jankowski, “I wanted any net worth that I brought into the marriage to go to my children.” That meant discussions on future scenarios before heading down the aisle. Achieving financial bliss in a second marriage can be even more challenging than the first time around. There may be decisions to be made on ownership of one or more homes or other major assets.
Often, there are children involved. To avoid future conflicts over inheritances, it is essential that you go through estate planning. Also, given that second marriages may not last either, a marriage contract will help protect your interests One of Jankowski’s discussions centred around ownership of the house. After seeking professional advice, she and her new husband opted to own the house as tenants in common rather than joint tenants. If Jankowski owned the house as a joint tenant, and she were to die, her husband would own the equity and the house, and that would not be leaving a legacy to her children. So the question was posed, what to do to be fair? “Yes, my children are a huge consideration to me, and so is my husband,” says Jankowski. “But should he remarry,
I don’t want his new wife to enjoy the fruits of my labour,” she adds, laughing. One of the things that a couple can consider is to own the house 50/50. A person’s will would reflect their 50% ownership, but that doesn’t mean the 50% would necessarily go to the spouse. In Jankowki’s case, if she were to die before her husband, half of the value of the house would go to her children and the other half to her husband.
While she was being pragmatic, compassion for her husband also played a big factor. “Knowing that my husband cares for me, I don’t want him to have to sell the day I die,” adds Jankowski, speaking hypothetically. “He needs time for bereavement, he needs time to think about his options.”
So in her will, her husband has to buy out her children’s half of the home or sell it and take his portion of his half of the equity, but he has a year’s grace to make the decision. Jankowski’s children are also in the loop on their decision — a key point for any blended family.
Helping clients to avoid future conflicts is what defines Richard Bennett’s practice as a lawyer in Mississauga, and as a practitioner of collaborative family law. Collaborative practice, relatively new in the field, emphasizes open communication, negotiations and a no-court approach in the case of divorce.
“People tend to focus on the immediate, on what makes me happy now,” says Bennett.”Then, when the bloom is off that flower, they move on to the next relationship. So part of what people need to focus on in a second marriage situation is on long-term planning.”
If there are children in the picture, whether young or adult, you are getting involved in a package. Bennett has lost count of the number of times that people come to him in a second marriage, just newly wed, and when drawing up a will they leave everything to the second spouse. They’re not looking at the fact that they have children and potential grandchildren that may come along.
“So one piece of advice I give is to focus on the big picture,” says Bennett, “and look at financial planning, look at issues in terms of will planning, estate planning — not only for themselves but for children, grandchildren and for the current spouse.” As well, he recommends a power of attorney in the event that you should you lose the ability to take care of yourself financially, mentally and physically.
Granted, many newlyweds of any age are not keen to discuss illness, wills and estate planning during the excitement of a new relationship. “They’re not comfortable issues to talk about,” says Julia Haasz, a lawyer in Mississauga, “because you’re talking about the relationship ending, and people think ‘I can’t possibly bring that subject up,’ especially the people with a lot of assets. They don’t want to mar the relationship.”
While, indeed, they are sensitive issues that you need to discuss, Haasz doesn’t consider them complex. “You’re simply protecting your assets and being fair with each other during the relationship.” In Haasz’s view, if there are any kinds of assets to protect, a couple would be foolish not to have a marriage contract. “Second marriages have a higher divorce rate than first marriages. There are some serious problems that go along with that. Blended families is certainly one, because not everybody is going to be on board with second marriages.”
With a marriage contract, you can protect your assets and set up your own situation to represent your situation and wishes. What a contract also does, in the possibility that the second marriage does not work out, is reduce much of the stress, arguing Haasz, herself a widow with a daughter and with the experience of working with clients, would not enter into a new relationship without a marriage contract. What’s important to know about a marriage contract is that it does need to be negotiated, just as a separation agreement, and it needs to have financial disclosure from both parties.
“So it’s completely upfront,” says Haasz, “because you want that agreement to be legally upheld at any point in time. And I think if you can do it in the collaborative law process, it is more conducive to the sensitive issues of the marriage contract.”
For more information on collaborative law, visit http://www.collaborativepractice.com/.
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