Did you know that 40% of families in the US are blended where there’s at least one child from a previous relationship?
Like most things in blended families, finances can be a little more complicated.
Every family has their own personal challenges and goals to consider, but here are 3 specific questions that we always ask blended families to think about.
Life insurance and estate planning are ESSENTIAL in blended families.
Parents should consider having a life insurance policy so that their kids would be taken care of if something were to happen to them. If you have kids from a previous marriage, it’s also important to look at the beneficiaries listed on the policies to see where the money would go.
Many parents have the children listed as the beneficiaries on the policies. One VERY important thing to note is that if the children are minors, the money could be managed by your ex-spouse!
In order to avoid your ex-spouse having access to your assets, you can set up a trust to hold any physical assets or money for the benefit of your child(ren) at your death. You would then name a trusted person (i.e. your current spouse, a family member or close friend) as the trustee of the trust in order to ensure that the funds would go directly to your kids in a manner consistent with your wishes.
Blended families should consider how they want their assets to be distributed if something were to happen to them. There’s no one size fits all approach. What works for one family may not work for another.
You may want to leave each kid an equal portion of your assets, no matter if they are your biological children or your step-children.
Or, if you have kids from a previous marriage AND kids from your current marriage, you may decide to leave a larger portion of your assets to your kids from your current marriage because you want to take into consideration the fact that your kids from your previous marriage will also be inheriting from your ex-spouse. One thing we have learned on our blended family journey is that fair is not always equal.
One of the most important things to have in a blended family is communication and complete transparency. Any budgeting approach can work if a couple is on the same page. Some things to consider include:
COMMUNICATE, COMMUNICATE, COMMUNICATE! You do need a family budget, but you don’t need finances as an added stressor in your marriage. Pick a strategy that works for BOTH spouses, and honor that approach.
We often see clients unintentionally forget to review beneficiary designations after they have gone through a divorce or have been widowed.
If you’ve had any life event from a divorce, remarriage or any event that changed your current circumstance, we highly recommend reviewing your primary and contingent beneficiary designations on your investment accounts, insurance policies and your employer retirement accounts. Make sure your ex-spouse is no longer listed as a beneficiary. Watch out for situations where you would be leaving money to minor children. If you feel like you don’t know what your options are, ask for help? A great place to start is with a CERTIFIED FINANCIAL PLANNER™ (CFP®) professional or an estate planning attorney.
We hope you can use these questions to start some good conversations with your spouse about your current financial situation!