Couples finances can be difficult enough. Throw in a second marriage with or without children and things can get even more complicated. This blended family finances checklist is here to help you start the money conversations you need to have now.
The blended family is defined as a family consisting of a couple and their children from current and previous relationships. Blended families are on the rise and you need to know how to prepare yourself financially.
I've already written about a Premarital Financial Checklist that all couples should consider before walking down the aisle. In this post, I'll discuss some of them in more detail. Plus, I'll share some possible legal & financial ramifications for blended families.
Please note – I am NOT a lawyer. I strongly recommend you consult with a family lawyer in your state (and the state bonus kids live in).
To kickstart your blended family finances, here's what you need to know:
1. Know your partner's full financial obligations to his/her children and ex-spouse
You'll want to know if your partner owes alimony or spousal support. Specifically, you need to know how much and for how long. You'll want to know what his/her child support obligations are and for how long.
Each state has different age limits – 18 through 21+. Generally, if the child goes away for college, support payments stop. If the child lives at home, payments continue.
You'll also want to find out what their financial obligation for college is. In general, this is split between the biological parents in proportion to their income.
I strongly recommend reading your partner's divorce decree and parenting agreement to know what the obligations are. Often, parents are required to have a certain amount of life insurance for their kid(s). This area is one big reason I recommend delaying marriage for blended families.
I have read M's divorce decree and understand his child support obligations as well as his required life insurance requirements for his son.
2. Consult a family lawyer
Just like you'd have a lawyer review your job contract, make sure you consult with a family lawyer in the state where the bonus children live (where the custodial parent lives, if not with you and your partner).
Ask them if your income could ever count and/or if there is precedent for this. They will generally say no.
This does not stop an ex-spouse from going after your money, especially if your partner is making less than usual or went back to school. Child support laws vary by state.
I consulted with 2 family lawyers and both told me to not get married!
3. Consider Delaying Legal Marriage
You may have heard that your income and assets won’t matter since they are not your biological children, but that may not be the case. This will not deter an ex-spouse from trying to get at your assets. Even if the suit is frivolous, you will still need to hire a lawyer (read: more fees) and spend time on the matter.
This is a top reason to delay marriage until the children no longer require child support and college support. The FAFSA does not ask for your income, but the college can.
If you are going to take this route I highly recommend you get paperwork in place – Wills, Health Care Proxies, and Power of Attorneys, especially if you have children with your partner.
We are delaying marriage until his bonus son graduates college.
4. Prenuptial Agreement
Prenups are essential for blended families to protect the interests of the partners (and children). This is a whole other topic and are state specific.
My advice in short would be:
- Keep premarital assets separate.
- Agree to keep retirement accounts.
- Discuss spousal support.
- Child support and custody cannot be stipulated in a prenup.
We are not married now but plan to have a prenup when we do tie the knot.
5. Estate Planning
Estate planning is definitely more complicated with blended families. I often see contention when there are bonus children and new children from the blended couple. Figuring out how to make sure the partner and children are taken care of requires gentle treading.
It is also difficult to really know what the assets and means of their ex-spouse truly is. If you are reading this post, chances are, you and your partner will have the means to be generous with everyone.
As mentioned in #1, your partner may have life insurance obligations to his/her children from the previous marriage. Take this into account when deciding on additional life insurance policies if needed.
My advice: Do not be stingy with your bonus children. Reverse the situation and see how it feels if your partner decided to cut them out if they were your children.
We have wills, POAs, HCPs and living wills. We have named each other as beneficiaries. Both children are well taken care of.
6. Financial Planning & Logistics
Blended families are often older when they marry and may continue to operate as separate financial houses. I recommend seeing everything as “one pot.” This does not necessarily mean having one joint checking account, however.
I favor the one joint checking account for joint expenses and two separate accounts. Additionally, I strongly encourage blended families, like all families, to plan financially together. This will take some additional planning to ensure everyone is taken care of.
At this time, our banking accounts are totally separate, but we operate as “one pot.” I ensure both of us max out our tax advantaged retirement accounts as it is all going towards our retirement.
Final Thoughts on Blended Family Finances
When you blend families together, things can get complicated and they also also usually wonderful. One of the ways to mitigate some of the tension and conflict that might come from mixing families is to have the hard conversations upfront. The sooner you do it, the better. Using these talking points, you and your partner can get your blended family finances in order so everyone is taken care of.
Any other tips for blended family finances? Comment below! ]]>