Tackling the Two Biggest Challenges of Financial Planning for Blended Families

2 years ago

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With the high incidence of divorce and remarriage, blended families are becoming the new norm. Unlike the traditional family, there are many aspects of a blended family that require careful and honest evaluation, including how to blend finances, especially when one (or both) spouses bring significant assets to the new relationship.
The two biggest challenges of financial planning for blended families are as follows:

1. Managing Joint Expenses 

  • All for one and one for all”—Both spouses deposit all their income into and all expenses are paid from joint accounts. Typically, the account is funded with an equal contribution from each spouse from other assets, including but not limited to, Required Minimum Distributions from retirement accounts.
  • Household account”—Both spouses fund a joint account with a like amount each month, quarter or annually to share equally in the common household expenses. In addition, each spouse maintains their remaining accounts and assets separately.
  • Drawing straws”—Both spouses determine, by draw, luck or voluntarily, which expenses will be paid directly by each spouse and all accounts are maintained separately.

2. Estate Planning

  • Balance—Balancing your desire to provide for your surviving spouse during his/her lifetime with your desire to provide for your children during their lifetimes can be a significant challenge. This challenge is further heightened when there is a minimal disparity between the age of your subsequent spouse and the ages of your children.
  • Avoiding the Will/Trust Contest—Avoiding a costly, emotionally draining will or trust contest is one of the greatest challenges in estate planning for blended families. Without an effective plan in place, your estate may be the subject of a long battle that significantly reduces its value and places those you love the most at odds. This is a common occurrence that all too often pits your new spouse against your children.
  • Unintended Disposition—If you pass away without a will or properly funded trust in place, your assets will pass under the laws of intestacy. These laws will result in a disposition of your estate that may surprise your new spouse and leave him/her without sufficient assets to care for themselves during their lifetime. Moreover, it will most likely not result in a disposition of your estate per your wishes.
  • Children of Multiple Marriages—Providing for children of multiple marriages can be a significant challenge. Will you treat your spouse’s children the same as your own, or will you provide that your assets pass only to your children? These questions require honest, candid conversations with your spouse and seeking counsel from an estate planning attorney.
  • Beneficiary Designations—Ensuring your beneficiary designations align with your overall wishes and provide the appropriate balance between your new spouse and children is a significant challenge that requires effective coordination and careful planning. If you forget to properly coordinate these designations, it can greatly undermine the disposition of your estate.

Like holiday planning for blended families, financial planning for blended families presents a myriad of challenges and potential pitfalls. If you have any questions about estate and/or financial planning for blended families, we would encourage you to call or schedule an appointment to visit with us.

-Chris Carns, Partner

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All written content on www.thecabanagroup.com website (the "Website") is for informational purposes only. The material presented is believed to be from reliable sources and no representations are made by Cabana, LLC, Cabana Law Group, or Cabana Financial, LLC (collectively, “Cabana”) or its affiliates as to another parties’ informational accuracy or completeness. All information or ideas provided should be discussed in detail with a financial advisor, accountant or legal counsel prior to implementation. No party, including but not limited to, Cabana and its affiliates, assumes liability for any loss or damage resulting from errors or omissions or reliance on or use of this material.

The views and opinions expressed are those of the authors do not necessarily reflect the official policy or position of Cabana or its affiliates. Any content provided by our bloggers or authors are of their opinion, and are not intended to malign any religion, ethnic group, club, organization, company, individual or anyone or anything.

Information presented is believed to be current. It should not be viewed as personalized investment advice. All expressions of opinion reflect the judgment of the authors on the date of publication and may change in response to market conditions. You should consult with a financial advisor before implementing any strategies discussed. Content should not be viewed as an offer to buy or sell any of the securities mentioned or as legal or tax advice. You should always consult an attorney or tax professional regarding your specific legal or tax situation.

Viewers or recipients of the information herein that do not agree with the term and conditions of use, should not utilize this website or any information contained herein. Decisions based on information contained herein are the sole responsibility of the person viewing the website. In exchange for utilizing the information on this website, the visitor agrees to indemnify and hold Cabana, its officers, directors, employees, affiliates, agents, licensors and suppliers harmless against any and all claims, losses, liability, costs and expenses (including but not limited to attorneys' fees) arising from the use of this website, violation of these terms or from any decisions that the viewer makes based on such information.