Second divorce could lead to financial ruin

When first marriages end, divorce tugs at emotions. The second time around, the effect can be felt emotionally and financially, experts state.

It is recommended by some that individuals pondering the thought of tying the knot once again should not re-enter into marriage without financial planning. While the odds of a first marriage ending in divorce are 50 percent, they rise to 67 percent the second time around, statistics show.

Life issues financially complicate the second divorce more than they do the first time. In the second divorce, when at least one spouse still might be paying child support or alimony, figuring out how to share a smaller pot proves tougher. Add to that the sharing of retirement funds and any capital gains taxes from selling assets.

And then there’s the recession, which has caused financial portfolios and home prices fall in value. When people try to divide dwindling funds, come up with fair child support and alimony, and then add in the financial impacts of the first divorce, a second divorce can devastate the wallet.

As unromantic as it seems, experts stress the need for a prenuptial agreement for the second marriage, whether the spouses bring considerable wealth or few assets into a marriage. Deciding a split in advance makes it much easier when the emotions at the end of a marriage are not part of the process.

The prenuptial agreement can be a simple contract that spells out which assets a party has entering the marriage, which parties each will maintain at a divorce and how much spousal support could be paid if the two have a great difference in income. Each might want to write inheritance stipulations to protect children from a previous marriage, as well, experts said.

As wise as it seems, there remain many people who enter a second marriage without a prenuptial agreement. If that is their wish, then experts said that both parties should collect documentation showing just what they are bringing into the union. They also should catalog all assets and debts.

Source: Reuters, “Divorce is hard, but second one can wipe you out,” Geoff Williams, July 13, 2012