Remarriage Finances Part 4: Inventorying Our Blessings And Responsibilities
By Joseph Warren Kniskern, Esq.
Planning For A Family Merger — Not A Hostile Takeover
In the first three installments of this series of articles on remarriage finances, we investigated how important it is to have the right spiritual attitude about money and life experiences of prospective remarriage partners. Now we shift our focus on how to inventory, and respect, each other's boundaries in handling personal financial assets and liabilities.
Who ultimately blessed us with all that we have? Of course, it is the Lord. Not only that, but it is God who gives us the ability to produce wealth. (Deut. 8:18) Since it all really belongs to God, and we are only stewards of His bounty, we need to ask ourselves what, if any, hedges or boundaries belong among those blessings as we enter into remarriage and a newly blending family. Do we "look out for Number One"? Do we think about our own biological family members first? Should we ignore the wishes of our deceased spouse when we remarry? What about our parents and future inheritances from them? Do we make a new start and put everything into the pot with our new spouse and family?
What about our responsibilities and obligations? There may be family members to care for--children of prior marriages, ex-spouses, invalid parents. There may be financial commitments--alimony payments and child support. There may be other beneficiaries who have an interest in pensions, retirement plans, and business interests, for example. There are many issues to sort out.
There is one financial issue most remarried couples should be able to agree upon at the outset. The money earned from their joint labors for the family after remarriage should be "our money", and the debts they incur should be "our debts". But what about our personal assets and liabilities before we remarry. Addressing that matter brings us to one of the most potentially volatile issues of all in remarriage. It is the question of...
Separateness: Are We Really Married Or Merely Two Singles Living Together?
Separateness is a very "sticky issue" indeed in remarriage. One of the greatest temptations facing those who remarry, is building walls of protection around themselves. In essence, they try to live independently from their spouses in so many ways, they seem like single persons. (In fact, it is quite easy to do.) If you are a marriage veteran, who has learned how to survive by steadfastly maintaining self-control and determining your own destiny, it may be second nature!
The issue of separateness becomes most apparent in how couples handle their premarital assets. Let's see how this force naturally arises as part of financial management in a remarriage.
Vickie, a widow with four children, received a sizeable life insurance settlement from her deceased husband, which was earmarked to be held for their children's college education. Vickie later remarried Roger, a divorcee with two kids of his own. After a couple of years, Roger's business fell on hard times. Creditors began asking for payment on loans. Would he lose the business or find a way to bail it out for another day? Roger chose the latter. He asked Vickie to "loan" him the life insurance/college fund proceeds. This put Vickie in a terrible conflict. She wanted to be supportive of her husband, but how could she justify risking the only solid means of support left to her children by their deceased father? Not knowing what to do, she reluctantly turned the money over to Roger. Within a year, creditors wiped out these funds and Roger lost the business. Now Vickie's children had nothing left.
Perhaps this emotional situation could have been avoided if Vickie and Roger had agreed in advance, perhaps through use of a separate private trust for the children, that these insurance proceeds were to be held in a "don't touch under any circumstances" account before the emotions of economic hardship led them to do otherwise. (We will discuss the use of private trusts, premarital agreements, and other similar legal agreements later on in this series of articles.)
But let's review some of the underlying factors at play here.
The Legal Considerations Of Separateness. As those who have experienced divorce know all too well, if a couple is not able to resolve financial issues in a divorce settlement, countless attorneys and judges stand by to give them an education in division that they will never forget! If they were not aware of how to handle their assets prior to divorce, they will learn the high cost of their mistakes after it is too late to remedy them in many cases.
If you intend to preserve assets for the future, it is important to understand how the courts look at what is "yours, mine and ours". Before you remarry, your lawyer should advise you of the property distribution laws in your state upon your demise, or if you or your remarriage partner ever become disabled or divorced. 
Separateness And Property Ownership. How does a typical court view assets and liabilities brought into a remarriage, as well as those acquired by a couple during the remarriage? Generally, a court may follow these rules in dividing joint, marital assets and personal assets: 
"Joint Marital Assets and Liabilities" are those assets acquired and liabilities incurred during the remarriage based upon the following factors:
- Assets acquired, and liabilities incurred, during the remarriage by either spouse individually, or jointly by both of them;
- Increases in value of any Personal Assets (described below) resulting from the efforts of either spouse during the remarriage, or from use of marital funds or assets, or both;
- Gifts between husband and wife during the remarriage;
- All vested and nonvested benefits and funds gained during the remarriage in retirement, pension, profit-sharing, annuity, deferred compensation, and insurance plans; and
- All real property (such as a personal residence) held by the spouses as joint property for the remarriage, whether bought prior to, or during, the remarriage.
"Personal Assets and Liabilities" are those assets acquired and liabilities incurred by either the husband or wife based upon the following factors:
- Assets acquired, and liabilities incurred, by either the husband or wife prior to the remarriage (such as credit card debt), and assets acquired, and liabilities incurred, in exchange for such assets and liabilities (such as debt consolidation agreements or personal home equity loans);
- Assets acquired separately during the remarriage by either the husband or wife by gift or inheritance (other than between the husband and wife themselves) and any other assets bought in exchange for such assets;
- All income earned from Personal Assets during the remarriage (such as interest on a trust fund inheritance), unless the income is treated, used, or relied upon by the spouses as a Joint, Marital Asset (such as using personal trust fund interest to buy a family car); and
- Assets and liabilities excluded from Joint, Marital Assets (and also liabilities) by agreement of the spouses (such in a trust or premarital agreement), and by inclusion of the same among the Personal Assets and liabilities of one spouse.
Courts use these factors (or others like them) to put all of the Joint Marital Assets into one pot into one category. A remarried couple may assume this pot of joint marital property is owned 50/50 between the husband and wife, but real life does not always work this way. Before distributions occur, courts frequently adjust the 50/50 split.  Ultimately, the parties receive a percentage of the Joint Marital Assets, and whatever Personal Assets belong to either of them as separate property. Judges have discretion in considering all the factors.
But, if it is your intention to maintain the Personal Asset nature of any money or property you own during a remarriage, it is vital that you keep the same separate without commingling them with any Joint Marital Assets. Otherwise all of the assets (such as an inheritance from a deceased husband) you thought forever belonged to you and your biological children, may be tossed into the pot with the Joint Marital Assets for division with your spouse and his or her children should the issue ever arise.
Separateness Arising From Estate Planning. There are many other ways that separateness comes up in financial areas--including many personal estate planning considerations of each remarriage partner. One mate may want to make sure that his or her biological children receive the family inheritance coming from their grandparents. The other mate may want to make sure that his or her parents in ill health are adequately provided for from personal premarital assets.
Estate planning issues are not limited to the remarried couple. Estate planning circumstances of those outside the marriage can impact the couple as well. For example, the tax laws allow individuals to make annual gifts to others of a certain amount, without having to pay gift tax. This is a good way for parents to begin distributing their estate early to their children. But it can create problems for married children. Consider Jennifer, who gives $10,000 a year to her son, but nothing to her daughter-in-law. She reasons, "My son pays the house insurance, property taxes and insurance on their cars. With her salary, my daughter-in-law buys clutter for the house, fad clothes, ridiculous shoes and gets a manicure and a pedicure every 10 days. She also changes the color of her hair every month." It is not difficult to see how damaging this practice can be to a remarriage, and how it not only reinforces separateness, but deep resentment and bitterness as well!
Separateness arises as a quick and easy solution to many financial problems. She takes the joint checkbook without telling him, and then forgets to write down the checks she writes. He is a boundaryless spender and runs up the credit cards, risking a bad credit rating for both spouses. Solution? Keep separate checking accounts and credit cards to avoid further fights. A good quick fix. Separate accounting highlights the troublespots and helps focus on the necessary remedies.
But even this "cure" can come full circle. Ann and Luke remarried, with each spouse having teenage children from previous marriages. After seven years of marriage, Ann discovered that her husband's mother gave him $10,000, which he put into a separate account but did not tell her about it. Although both spouses work and collectively earn a good income without living lavishly, somehow the couple is always strapped for cash. Ann thinks Luke is depositing her paycheck into a joint checking account and using this money to cover household bills, while his income is dumped into several other separate business accounts, to which Ann has no access. Result? Ann is suspicious that her husband is hiding money from her and may be setting himself up to leave her. Of course, maybe Ann's suspicions are correct. But also, maybe not. This couple needs to make adequate disclosure of finances to each other in a low-key, non-accusatory and non-confrontational manner (perhaps with the assistance of a marriage counselor or mediator). But it is easy to see how having separate accounts can be a double-edged sword.
It is almost inevitable in remarriages--there will be at least some financial separateness. But there is a price to pay in the long run if that separateness rules the relationship. And certainly, planning around all of the legal and other practical financial considerations will be shallow and short-sided indeed if a couple does not also factor in the emotional cost of financial separateness.
The Psychology Of Separateness. The reasoning is understandable. Many of those remarrying after collapse of a prior marriage are strongly inclined to self-protection. I certainly was so inclined.
I married for the first time later than most. My divorce occurred as I entered mid-life. But the financial issues of my divorce were intensely painful, as attorneys interfered and upset what would have been a fair and gracious financial settlement with my first wife. (The events of my divorce are set forth in When The Vow Breaks, and will not be discussed here.) But, after transferring a significant amount of assets to my first wife that had taken me 30 years to accumulate with the Lord's help, I knew that I could not afford to take another financial hit as I neared retirement. It may be a lack of faith on my part, but realistically I could not discount the fact that there might be no financial recovery. Would I have enough to live on after leaving my law practice? Who knows? Also, I wondered if it would be good stewardship to put the Lord's blessings at risk of loss in worldly courts of law.
But then I thought of Jesus' promise in Matthew 6:33: "But seek first His kingdom and His righteousness, and all these things will be given to you as well." Did I really believe what Jesus told me? Of course! Even so, I had to confess some fear and doubt. I also knew trust and commitment are vital in any marriage--especially a remarriage. Each spouse needs to know that they have equal participation and responsibility in making financial decisions. Even so, how can remarrieds realistically trust each other in premarital and marital financial matters, without first having some track record of experience? Obviously, this does not happen overnight! Perhaps you and your beloved have experienced some of the same inner conflicting feelings. Welcome to the club!
Like it or not, it is true that marriages--and especially remarriages--are business ventures between two partners, who must work hard to proactively negotiate and compromise financial decisions throughout their entire relationship. As difficult as that is to do, and while it is easier to hide our feelings and wear the mask which falsely says "everything's fine, dear," constant communication and feedback are vital. The worst troubles arise when mates shut down communication and repress their feelings. Then financial issues will park the remarriage and leave you stuck in neutral. Believe it!
Remember, it is the lifestyle, power, and prestige that money represents, and the control it provides, which create the most emotional upset for a remarried couple. This power and control truly scare people! And remarriages are where these issues are most acute.
Couples entering first marriages usually begin on a fairly equal financial footing. Not so with remarrieds, many of whom have received multiple financial blessings from long careers, divorce settlements or inheritances. More often than not, there is a financial imbalance between the spouses. This affects each spouse's self-concept. If I do not have as many assets coming into the remarriage as you do, I may not feel as valuable and worthy. I may fear that this imbalance could keep me imprisoned by financial limitations that may not affect you. I may fear that you will call the shots at my expense. If I see any evidence of your using your financial power to my detriment (as we saw in the example of Ann and Luke above), I may not trust you in this or other areas of our relationship. This is not to say such feelings are healthy or proper for Christians, but it is reality!
First and foremost, the "ours" aspect of the relationship falls away into "this is yours," and "this is mine". He has a house that the couple moves into. No matter what is said, it will always be "his house" to his wife. The coffin nail embeds itself the first time she wants to redecorate, or the children damage the home, and he says, "This will not happen in my house!" Or a wife may have an inheritance and a sizeable investment portfolio coming into the remarriage, which he does not possess. Unless he has full access and equally shared control over this asset, it will always be "her investment portfolio" no matter how many times she dips into it to help pay for marital expenses. The power and control deathblow comes when he wants to use some of the investment portfolio and she says, "No." Result? Frustration, anger and resentment build. How dare he make me feel like a stranger in our own home? The nerve of her hoarding this investment portfolio and cutting me out! I feel like I am less than an equal partner in this remarriage. He has the gold, and is making all the rules. Meanwhile, I feel powerless, and at my spouse's mercy. What I bring into the marriage is "ours", but what he has is "his" and "not mine". This may lead to further suspicion that "What's mine in mine, and what's thine is mine too!" What remarriage partner in these circumstances wouldn't wonder, "Is this truly a marriage, or merely mutual coexistence with my mate in control?"
Outwardly the spouse with the monetary assets may be genuinely perplexed. "But sweetheart, both of us directly benefit from all that I own. Everything I have is for both of us, and our family, to use and enjoy." (If these words have a familiar ring to them, you're right! The father in the Parable of the Prodigal Son used a similar plea in a vain attempt to get his older son to come rejoice over the return of his younger brother. (Lk. 15:31)) The wealthier spouse might be convinced that his or her personal management style is prudent and generous. However, that is not how the money flows day-to-day. The assets remain in one spouse's name alone. There will be no shared control. These actions speak louder than any words. And the asset-laden mate may not even be aware of how deep this problem goes! Why? Because the wealthier spouse, being in denial, does not understand that, while he or she enjoys the personal pleasure, safety and security of having these assets, there is a deep-seated fear of losing them. And losing them also means losing the power and control to which he or she has become so comfortable. And losing power and control will probably create great anxiety for this spouse. So the wealthy spouse thinks he or she absolutely must hang on to everything, and covers for it by making statements like "everything I have is for us to use and enjoy."
What Are The Consequences Of Locking Down Assets In One Spouse's Exclusive Control? As we have seen, money is a direct, tangible measure of the ultimate power and control in our society. If you have it, and your spouse doesn't, he or she may be resentful and withdrawn. It will affect your sex life. It will affect your intimacy. Your mate may fear being cast aside and "being poor again". This fear haunts many formerly single mothers. Withholding trust may be your spouse's only personal salvation, because it keeps your mate watching and on guard against you.
Unfortunately, this breach in the relationship may lead you and your spouse to avoid trusting God with family financial matters. What a tragedy this scenario presents! These power and control issues need to be addressed directly and continually throughout the remarriage.
There may be dissension and retaliation, as one spouse uses the monetary power within his or her control to blow the budget in a game of "I'll show you" one-upmanship. But the more inevitable consequence is the widening emotional distance between husband and wife. It is truly amazing how often challenges with money become so intricately entangled with vital intimacy issues among remarried couples. As one spouse withholds assets, that person also is, in many ways, withholding himself or herself. The couple separates emotionally, as anger and resentment build. Sexual feelings shut down, leaving the couple dry and empty. A marriage meltdown begins.
Why let this happen to your remarriage? In our next installment, we offer a few suggestions to keep separateness from overwhelming your remarriage!
 The laws of each state can vary considerably. This is especially true if you and your spouse are domiciled in a "community property" state (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington or Wisconsin). In community property states, for example, each spouse acquires an automatic one-half interest in all property and income of the marriage. By contrast, in non-community property states each spouse has an interest in the marital property, but when considering this interest for equitable distribution it may not automatically equate to a one-half interest.
 If property division between spouses ever becomes an issue, courts usually divide joint, marital assets between the spouses, while separately awarding personal assets to the spouse who owns those items.
 For example, if one spouse is in more financial need than the other, the court may award more property toward the support of the needy spouse. Child custody issues also can affect property distributions, such as awarding the homestead to the parent having primary custody. If one spouse has clearly worked harder in making a Joint Marital Asset more valuable, that also affects the distribution percentages.