When Wealthy Women Remarry Men of Lesser Means
Women with children should use a marital trust, advisers say
But when the corporate lawyer with a net worth of $5 million and earning a seven-figure salary explained she was marrying a carpenter who had only about $200,000 in assets, the adviser urged her client to proceed with caution and stressed the need for smart planning.
“Remarriage can be even more complicated when one spouse has significantly more assets,” says Ms. Vasileff, who is also a collaborative divorce practitioner with Divorce and Money Matters in Greenwich, Conn. The firm manages about $40 million.
Indeed, remarriage is becoming more complicated for some wealthy women. About three in 10 women who remarry bring more assets into the marriage than their new husbands, according to a recent U.S. Trust report.
As a result, financial advisers are helping these women protect their assets, manage large differences in income and communicate effectively about their wealth with their new, less prosperous husbands.
In Ms. Vasileff’s case, for example, she asked the client and her new husband for a list of their accounts and expenses.
Since they had vast differently incomes, she recommended they each keep their individual accounts separate, including the credit cards they opened prior to their marriage.
“Don’t assume the other spouse respects your money and won’t abuse your trust,” Ms. Vasileff notes.
She then worked with them to identify joint expenses such as groceries, utilities and vacations for which they set up a joint account. The couple decided to contribute a proportionate percentage based on their income to pay for those shared expenses but opted to give each spouse equal decision-making power.
As a wedding gift, the woman set up a $50,000 account for her new husband, which he could add savings to or spend as he wanted.
Ms. Vasileff also encouraged the couple to update their estate plans, which they did. The pair, who didn’t have any children, opted to leave each other all of their respective assets, while electing relatives as contingency beneficiaries. They also arranged for long-term care for each spouse should they need it later on.
The couple agree to communicate monthly about their individual and joint accounts. Because they were upfront with each other and were able to openly speak about the disparity in their incomes, they choose not to enter into a prenuptial agreement, Ms. Vasileff says.
As for wealthy women with children who remarry, they should consider using a marital trust, says Judy Slotkin, U.S. Trust Market Executive in New York. A marital trust would ensure that should the wife predecease her spouse, the husband would have the use of assets, such as a home, during his lifetime. But the assets would pass on to her children after his death.
“The topic is uncomfortable and unromantic. This is where an adviser can add value broaching these tough topics,” she says.
Ms. Slotkin recommends that women who have been highly involved in managing their finances premarriage continue to do so. And she suggests that they should have prenuptial agreements; if not, then they should enter into a postmarital agreement.
Financial planner Kathleen Longo stresses that before a wealthy woman remarries, it is crucial she get a copy of her soon-to-be-husband’s credit history, to determine if he has a lot of debt and to avoid martial strife after-the-fact.
One wealthy woman the Edina, Minn., planner worked with didn’t follow this advice and found out about her new spouse’s $30,000 in high-interest credit-card debt two years into the marriage when he lost his job and wasn’t able to pay the bill.
“The debt created a huge source of tension in their marriage as she felt obligated to take over the payments,” says Ms. Longo, president of Flourish Wealth Management, which manages about $26 million.
Since he didn’t have any other assets except for a small retirement account and because the wife wanted to help him, Ms. Longo suggested the wife tap a home-equity line of credit to make a loan to her spouse.
The wife decided to do so as she realized that was better than giving her husband the money outright.
The good news: the incident opened up the couple’s communication about their finances and views toward spending, finances and debt, Ms. Longo says.
The husband is also now living within his means as he doesn’t want to have to rely on his wealthy wife for another bailout, she says.