Financial tips to build strong blended families

Craig Torr

Financial planning for couples in their first marriage who have no children from a previous relationship is relatively easy to navigate. However, the traditional “nuclear” family is no longer the norm and financial planning has had to evolve to cater for more diverse and complex family structures.

In this article, we explore the unique financial planning needs of blended families.

Maintenance commitments

When entering into a new relationship with maintenance obligations to an ex-spouse and/ or children, complexities can arise. An ongoing financial commitment to a previous spouse or child can be a source of contention in a new relationship, particularly if you want to have children together. You may be faced with competing financial priorities, struggling to honour your financial commitments to a past relationship while wanting to build a financial future with your new partner.

Many divorced women with ex-husbands who renege on their maintenance obligations are put in similarly uncomfortable positions when entering new relationships. If your exspouse regularly fails to pay maintenance, your new partner or spouse may resent having to provide financial assistance for children they are not legally obliged to support.

Marital regime

Couples marrying later in life are likely to have more complex antenuptial agreements due to the wealth each has accumulated before the marriage. It is always advisable to seek guidance from an experienced attorney when structuring your marriage contract, bearing in mind that certain assets are excluded when calculating the accrual.

These include assets that accrue to a person before the marriage, an inheritance, legacy, trust or donation received by a spouse in a previous marriage.

Couples can include or exclude certain assets in the antenuptial contract, depending on their circumstances. For instance, they can exclude their retirement fund benefits from the accrual provided the contract is worded accordingly.

Retirement funds

Another important factor when planning for complex family structures is the retirement fund beneficiary nomination. In the case of retirement funds, bear in mind that your beneficiary nomination is just a guide to the fund trustees on how you would like your benefits distributed in the event of your death.

They are obliged to consider the circumstances of all your potential financial dependants – a process that could take up to a year to complete – before deciding how your death benefits will be distributed.

This means that even though you may have nominated your current spouse and your mutual children as beneficiaries of your retirement fund, the trustees can find that your ex-spouse, children from a previous relationship or an illegitimate child meet the criteria of financial dependency and are eligible for a share of the death benefit.

Medical aid

In terms of the Medical Schemes Act, any person who is financially dependent on you can be registered as a dependant.

This includes your spouse or partner, children under the age of 21, those older than 21 who have mental or physical disabilities, elderly parents and immediate family in respect of whom you are legally liable for family care and support.

However, the scheme may require that you provide proof of such dependency.

This means that you could have your minor children from a previous relationship registered on your medical aid with your current spouse and children and your aged parents.

The same applies to your gap cover benefit although there may be restrictions in terms of the number of dependants you can include on a family gap cover policy or in respect of the age of a dependant in the case of registering an elderly parent.

Torr is a certified financial planner at Crue Invest