- \ Gerard Gruber
- July 14, 2022
A recent study reveals that out of every 1,000 divorcees, about 25 get remarried. The median age of couples who choose to remarry is mid-40s, making it likely that at least one spouse has children from a previous marriage. Building a new...
A recent study reveals that out of every 1,000 divorcees, about 25 get remarried. The median age of couples who choose to remarry is mid-40s, making it likely that at least one spouse has children from a previous marriage. Building a new blended family together is a beautiful thing, but it’s not without its challenges.
If you’ve recently remarried, you and your spouse have some important financial discussions ahead of you. We’re exploring the five most common challenges, and what your family can do to address them.
Challenge #1: Estate Planning & Inheritances
When you and your spouse share a child, estate planning tends to be fairly straightforward. But when you bring children and assets from a previous marriage into the mix, things can get complicated—and even a bit uncomfortable. Many struggle with the idea of splitting their own child’s inheritance with step-siblings. And once a decision is made, how do you communicate your intentions without offending anyone?
Unfortunately, avoiding the topic of estate planning doesn’t make it go away. In fact, neglecting to make a plan now can create serious family turmoil later down the line. Take some time with your new spouse to update important estate planning documents including:
- Wills
- Trusts
- Beneficiary designations
- Power of attorney
- Life insurance policies
Your attorney and financial planner can work with you to update these documents and review your estate plan in detail.
Challenge #2: Reprioritizing Financial Goals
The financial goals you had as a single parent look a little different than the ones you and your new spouse have together. That means that continuing to follow your post-divorce savings plan and investment strategy isn’t helpful in addressing your new family’s long-term goals. As your priorities change, your financial plan should be updated accordingly.
Work together to identify new milestones as a couple: retiring together, covering college tuition, paying for a child’s wedding, buying a vacation home, etc.
This is an opportunity to address questions like:
- Because our combined net worth is higher, can we afford to take on more risk?
- Does my spouse follow a different investment philosophy than me?
- Between the two of us, what debt should we focus on paying down first?
While this is especially important to do when bringing two families together, checking in on your financial wellbeing is an ongoing process. As you and your new spouse evolve together, reassess your priorities and long-term goals with your financial advisor regularly.
Challenge #3: Combining Accounts
Similar to what we discussed above, determine what assets or liabilities should be combined and which will be kept separate.
Over the years, you and your spouse have each accumulated a number of accounts:
- Savings and checking
- Brokerage accounts
- Loans (car payments, mortgages, student debt, personal loans, etc.)
- Lines of credit
- Credit card debt
- Retirement savings accounts
Make a list of every account you own. It may be helpful to combine certain ones—like savings and checking—to cover household expenses. But in some cases, simply updating beneficiary information to include your spouse may be all that’s needed.
So which accounts should be combined, and which are best left separate?
That’s a tough question that will take some sorting out between you, your spouse, and your financial advisor. Some people are open to completely combining finances, while others feel more guarded after experiencing a stressful divorce. Whatever conclusion you come to, make sure that you and your spouse are on the same page and respectful of each other’s decisions.
Challenge #4: Educational Expenses
If your blended family includes young children, it’s important to discuss future educational expenses. Considering the cost of college tuition in Connecticut is 31.04% higher than the national average, educational expenses will likely play a significant role in your and your spouse’s savings plan.
One or both of you may already contribute to a 529 account, but should those contributions increase now that you’re married? Or should each parent only be responsible for covering the expenses of their children from a previous marriage?
In some parenting agreements, each divorced parent has a financial obligation to pay for a child’s education—typically the responsibility is divided proportionally based on income. This is something to confirm with your attorney if you are unsure of your legal obligation.
Challenge #5: Managing Spousal or Child Support Payments
Spouses should be honest and upfront with each other regarding court-ordered alimony. If either you or your spouse are required to pay spousal or child support, this has to be accounted for in your family’s monthly budget.
Both spouses need to be aware of the specifics including how much, how often it needs to be paid, and for how long.
As an example, you may be required to pay child support until your child turns 19 or finishes high school, whichever comes first. But in some states, child support payments continue if the child enrolls in college or vocational courses.
Protect Your Family From Financial Stress
If you’re getting ready to remarry, or you’ve recently combined families, now’s an ideal time to conduct a financial check-up. It’s important to start this new chapter off on a positive note, and getting your financial priorities aligned can do just that.
Our team of advisors are experienced in helping blended families like yours reassess their financial plans and address their changing needs. Don’t hesitate to schedule a complimentary call to discuss what we can do to help nourish a healthy and happy family dynamic.
This information is for general purposes and is not intended to provide specific investment advice or recommendations. Opinions, estimates, forecasts, and statements of financial market trends are based on current market conditions and are subject to change without notice. Individuals should always consult their own financial or tax advisor regarding their specific situation before acting on any information provided. Harbor West and Geneos Wealth Management, Inc. do not provide tax or legal advice.
Securities and investment advisory services offered through Geneos Wealth Management, Inc. Member FINRA/SIPC