Second chances can bring a lot of joy, particularly when it comes to getting remarried. But tying the knot again can present some challenges, especially when it comes to planning how your estate plan provides financial support for ‘blended family’ members from different marriages.
Each spouse may have brought different assets into the marriage and may have different objectives when it comes to passing wealth to children from different marriages or to each other. However, if you discuss these matters openly as a couple, consult estate planning professionals, and express your intentions clearly through legal documents, you’ll likely be able to create a plan that addresses the needs of your blended family.
Here are two things to consider before saying I do…again.
It’s important for spouses with blended families to discuss how they want to leave their individual assets. If one was single for a long time before the marriage, his or her investment, insurance and bank assets may name his or her children (or even former spouse) as a beneficiary. Be aware that any account beneficiary designation will take priority over the provisions of a will. Therefore, it’s not enough that newly-remarried spouses rewrite their wills; it may be necessary to change these account designations to help ensure that each surviving spouse has enough assets to live on if the other one dies.
Think holistically about your estate planning. For example, you may want to provide a death benefit through a life insurance plan for your spouse, while allowing the rest of your estate to pass to your children.
It is extremely important that you do not name minors on your beneficiary designations. Minors are not legally able to control assets and a guardian may have to be appointed by the court to manage the asset until the minor turns 18.
Speak to a financial planner about strategies to allow your children to benefit from your life insurance and pension plan without court intervention.
Other issues to consider when updating your beneficiary nominations are:
- Allocating specific gifts such as family heirlooms to avoid family arguments.
- Identifying a guardian of minor children from prior relationships.
- Providing details of what is to occur in the event of incapacity of either parent/ partner, including a review of power of attorney documents.
- Including any reasons why a beneficiary has been excluded, possibly in the form of a statutory declaration that is kept with the will.
Newly-married couples should clarify any ground rules upfront regarding ‘yours’, ‘mine’, and ‘ours’ to avoid confusion. It’s important that each have a good understanding of the new blended family’s finances. Many couples will start out having separate accounts, primarily using them to pay for personal expenses, including those of children from a previous marriage.
When maintaining a joint account for ongoing expenses as a couple, it’s important to discuss how much each spouse is going to contribute monthly – an equal amount or a percentage. Since financial circumstances change due to job loss, business ownership or promotions, couples should revisit this arrangement regularly to ensure that it still meets their needs. Keeping up clear, consistent and frank communication about finances truly helps to prevent misunderstandings.
Talk to a professional
No one wants to be second best, especially a new spouse or child. This can make estate planning in a blended family particularly difficult, as it can take more work to ensure that everyone feels like they are being treated fairly.
Certified financial planner Trudy Luthuli says: “Compromises are necessary, and my expertise is in giving families ideas and coming up with a solution that can make everyone happy. And since no one wants their family to end up fighting in court after they are gone, planning is the best way that this most important wish is met.”