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Blending Families’ Finances After Remarriage

The Beatles may have claimed that "all you need is love", but it is never so simple. This is especially true for those who are planning to remarry after a divorce. Merging two established families together is a difficult and challenging process by nature, but when you throw money issues into the mix, it can turn downright nasty. 

These three tips on blending family finances after remarriage can help you and partner alleviate some of the stress surrounding financial issues. This will allow you to concentrate on what matters most: your new family.

1. Discuss it Before the Marriage

Talking about money is not the most romantic topic, but it is important to have an open and honest money discussion before tying the knot. Each person should provide full disclosure of any income, assets, and debts they currently have. Sort out who will repay the debts and whether the new spouse will assume legal liability for them. If someone is entering the marriage with an ongoing expense, such as college tuition for an older child, the bill can cause serious complications in the future. Figure out now whether the child's birth parent will continue to pay for the cost or if it is an expense which both spouses should shoulder.   A prenuptial agreement is a good start and will be a springboard for some of these discussions.  Rather than look at that as a negative, consider it a smart step in laying out your wishes.  Be prepared for the possibility that your wishes may change over time, as you build your life and possible financial dependence on each other.  Consider the impact and expectations of your children especially if there is a large age difference between you and your new spouse.  There may be a desire or an expectation for the children to inherit at the parent's death, but if the beneficiaries are all changed to the new spouse, that may not be what happens.    Having clarity around how things would work and communicating effectively is key to making the right decisions here. 

2. A Blended Family, but Separate Bank Accounts?  

There are many ways to handle bank accounts for blended families. One way of the simplest approaches is to maintain separate bank accounts for assets brought into the relationship and a then create a new, shared bank account for combined expenses. Some couples choose to contribute a portion of their income into the shared account while depositing the rest into their private accounts. Other families put all their income into the shared account once they are married. There is no right answer, rather the important thing is to find a solution that works for everyone. 

3. Plan for the Future

Sit down with a financial professional to get advice on how to plan for the future as a family. You will probably want to speak with a financial planner who either has specific experience helping newly blended families, or is a CERTIFIED FINANCIAL PLANNER™ and will take a holistic approach to your finances, discussing budgeting and goals, not just investments1. And although it may be difficult to think about, the sooner you make financial and legal decisions about what will happen to both the children and assets if one of you passes away, the better.   

I have navigated this issue with several clients.  It can be challenging to consider all of the options and again, your wishes may evolve over time.  I help people lay out the possibilities and refer to attorneys to have the necessary documents drafted to execute the agreed upon strategy.   A marriage later in life, with children from previous marriages and existing assets and responsibilities becomes more of a merger versus a young couple building their financial lives from the ground up.  My job is to ask some of the tough questions and make sure you have considered the options and consequences thoroughly.   Let me know if I can help you and your family.  

While it is true you may not be able to live on love alone, money doesn't have to be the source of your new marriage's problems, either. Considering the three tips above will help you to start the conversation with your loved one about the role of money in your new family. 

1CFP Board

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as investment, tax, or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.