Financial Planning for Blended Families
February 9, 2021 | Alisa Wolfson | Millie (Women and Money)
Stacy Miller, CFP® was recently featured in a Millie article titled All the Things I Wish I Knew About Money Before I Became a Stepmother. In it, author Alisa Wolfson talks about the money matters most important to women who remarry.
This is the original text that Stacy shared:
When I approach a new financial plan, I always ask my client what their goals are. Depending on the client, they might not have a ready answer. You might be thinking, how can they not know their goals? Well, they might have ideas but not know the priority or the short- and long-term advantages and disadvantages. Blended families who include children from current and previous relationships can make this process even more complicated.
The first financial priority should be to take care of your current cash flow situation. This means making enough money to pay your current monthly expenses for your nuclear family (the ones living with you).
Next, and it is not fun to think about, but you should consider how your current cash flow situation could be affected by your disability or death. How will the mortgage get paid? How will food get on the table for your family? A part of your financial plan should include estate planning documents like a Last Will and Testament and a Durable Power of Attorney. You might want to invest in a life insurance and/or disability insurance policy. You should also be aware of how you title your financial accounts (to include your home) as proper titling can make things much easier for your beneficiaries if the worst happens.
The third priority should be taking care of your long-term future cash flow. This can mean planning for your retirement and/or planning to leave an inheritance for your beneficiaries. I like to think of this as financial planning for your future self.
In blended families, you will need to think deeply about the priority of your beneficiaries. How might things have changed when you remarried? One of the worst mistakes in financial and estate planning, is not updating your beneficiaries. How will your current spouse feel about your former spouse receiving your life insurance policy because you forgot to update it?
There is no one-right-way to approach financial planning for blended families. I have a client who lost his wife after over 40-years of marriage. It was important to him that the assets he built with his former wife, be available for their children. It was equally important to him that he take care of his new wife. His solution was to divide his assets with his children as beneficiary on some and his current wife as beneficiary on others.
Bottom line, if you are considering remarrying and creating a blended family, or if you already have, make certain that your financial and estate documents reflect your current wishes. Review them annually and change them as needed. Finally, always ask for help from a trusted expert if you need it.