ON THE MONEY: Blended families can cause financial headaches
The definition of a family has changed dramatically from the halcyon days of “Ozzie and Harriet” or “Father Knows Best.” By the way, here is a piece of trivia. What was Robert Young’s occupation in that series? Would you believe that he was a life insurance agent?
Today, blended families outnumber the traditional nuclear families – married families consisting of a father, mother and one or more children. A blended family is one in which one or both spouses enter the marriage with children from a previous marriage. There can be a lot of psychological pressure in blended families, since each spouse is attempting to meet the needs of different persons, each with their own unique sets of wants and needs.
Spouses in a second (or third) marriage want to please their new marriage partner, along with their children from a previous marriage, who may live with an ex-spouse. Then too, the new marriage may produce children who need love and attention. Moreover, keeping up with all of the grandparents and in-laws can be a struggle by itself.
The first issue that must be dealt with is: how will current family expenses be handled and where will the money come from? In many cases these current expenses are involved with alimony and/or child support – either paid to a former spouse or received from a previous spouse. Couples must decide how these financial arrangements will be handled and then they must gauge the impact on the blended family.
It is not a bad idea to have discussions with the ex-spouse(s) to discuss these issues and possibly have an attorney draft a formal agreement to address all of the financial issues that are not specifically dealt with in the divorce and child support agreements. One important issue is who may claim the children as dependents at tax time.
It may be just as important to recognize differences in money management styles, and both partners in the new marriage must realize that they each may bring baggage filled with mistrust and insecurity from having divided their respective assets in a previous marriage.
If the new marriage is recent, each spouse may speak of “my money” and “your money,” since the trust factor has not been fully developed yet.
Other issues to be considered are:
• What are the debts of each spouse and how will these debts be repaid?
• If both spouses own residences, whose house will get sold and how will the proceeds be handled?
• Life insurance policy beneficiary designations may need to be updated.
• How will the spending and investing styles of the newlyweds differ and how may those differences be addressed?
• How will family assets be apportioned at the death of one or both spouses?
• How will long-term care needs be addressed and paid for in the event that one or even both spouses will require such care?
• Wills, living wills, durable powers of attorney and other important documents should be updated to reflect current realities.
• Finally, it will make sense to involve children from a previous marriage in certain financial discussions, particularly if the newlyweds intend to combine their assets.
• In more cases than not, it will make sense to visit with a local estate planning attorney to gain his or her perspective, particularly if one spouse has considerably greater assets that the other.
Got a financial planning question for Greg? You may email him at firstname.lastname@example.org.
Greg Roberts is a certified financial planner with 35 years of financial and estate planning experience.