Yours, Mine, Ours – Financial Considerations for Blended Families
When I decided to get remarried, it was an exciting time for me and my (now) husband. What we quickly found, however, was that decisions we had made prior to our previous marriages, such as where we would live, financial decisions and now, disciplining and raising kids from our previous marriages, were not as straightforward the second time around.
Managing finances in a blended family are complicated because of the complexity of relationships with ex-spouses, children from previous marriages and inheritances. Some of the traditional ways of managing money may not work for a remarriage. For many blended families, what works better is dividing assets into what’s “yours,” “mine” and “ours”.
Clear Communication and Expectations
The key to successful financial planning in a blended family is clear communication and expectations. Determining which assets fall into what category (yours, mine, and ours) requires a discussion about your current financial situation, priorities and expectations for the future. It’s helpful to discuss what assets you plan to share and which will remain separate. Begin to develop an understanding regarding each other’s saving and spending habits, goals and concerns. The more you can share with your new partner, the less opportunity for surprises or misunderstanding.
It is also important to discuss any financial obligations you have for alimony and child support as well as any accounts or life insurance policies that name your children or ex-spouse as beneficiaries.
Issues unique to remarriage/blended families
Communication is the key to the success of most families. There are issues, however, that are unique to blended family planning such as:
Potential Loss of Privacy: When a spouse has obligations for child support or alimony, the courts may require that there is a true-up once a year. These spouses may have to provide tax returns to their ex. If they are providing a joint tax return, there may be information on there about assets and income (of the current spouse) that will be revealed to their ex. This may be true of any joint accounts they hold.
Benefit Status: If you’re receiving Social Security benefits from a former spouse, those payments will stop when you get remarried. Additionally, if you’re a widow or widower who is remarried before age 60, you will lose the rights to survivor benefits from your former spouse.
Estate planning: Executing an estate plan is especially important when you remarry. Trusts will determine what happens to your assets when you pass away. In addition, powers of attorney for healthcare and property will determine who can act and make decisions if you are incapacitated.
Post Nuptial Agreements
A postnuptial agreement is a legal contract signed by a married couple after they are married. It is a useful tool to dictate how assets will be divided in the event that the marriage goes awry. This is especially useful if you came in with significant premarital assets or if you expect a large inheritance sometime in the future. This allows the parties to exit the marriage “whole.”
Additionally, postnups can pre-determine the share of assets your spouse and children will receive in the event of a divorce or your death. Many states will automatically give current spouses a share of your estate at death. A signed postnup will ensure your children will receive the inheritance you want them to.
With the number of remarriages on the rise in the U.S., American households look very different than just a few years ago. The modern family is dealing with an increasing amount of complexity. Fortunately, there are a lot of resources available to these families to help them along the way. Not sure where to start? Don’t be afraid to reach out to our team. We have helped many blended families so that they can live a full life!