Adjusting your finances
NEW FAMILY: CLARIFY GROUND RULES UP FRONT
Important for spouses with blended families to discuss how they want to leave individual assets.
Second chances can bring a lot of joy. But tying the knot again can present challenges, especially when it comes to planning how your estate plan provides financial support for “blended family”members from different marriages.
Here are two things to consider before saying I do … again.
Beneficiary designations
If one was single for a long time before the marriage, their investment, insurance and bank assets may name their children (or even former spouse) as a beneficiary.
Any account beneficiary designation will take priority over the provisions of a will. Therefore, it’s not enough that newly-remarried spouses rewrite their wills; it may be necessary to change these account designations to help ensure that each surviving spouse has enough assets to live on if the other dies.
Think holistically about your estate planning. For example, you may want to provide a death benefit through a life insurance plan for your spouse, while allowing the rest of your estate to your children.
It’s important you don’t name minors. Minors aren’t legally able to control assets and a guardian may have to be court-appointed to manage the asset until the minor turns 18.
Speak to a financial planner about strategies to allow your children to benefit from your life insurance and pension plan without court intervention.
Allocating specific gifts such as family heirlooms to avoid family arguments.
Identifying a guardian of minor children from prior relationships.
Providing details of what is to occur in the event of incapacity of either parent/ partner, including a review of power of attorney documents.
Including any reasons why a beneficiary has been excluded, possibly in the form of a statutory declaration kept with the will.
Define accounts
Newly-married couples should clarify any ground rules upfront regarding “yours”, “mine” and “ours” to avoid confusion. It’s important that each have a good understanding of the new blended family’s finances. Many couples will start out having separate accounts, primarily using them to pay for personal expenses, including those of children from a previous marriage.
When maintaining a joint account for ongoing expenses as a couple, it’s important to discuss how much each spouse will contribute monthly. Since financial circumstances change due to job loss, business ownership or promotions, couples should revisit this regularly. Clear, consistent and frank communication about finances helps prevent misunderstandings.
Talk to a professional
No one wants to be second best, especially a new spouse or child. Certified financial planner Trudy Luthuli says: “Compromises are necessary, and my expertise is in giving families ideas and coming up with a solution that can make everyone happy. “Since no one wants their family to end up fighting in court after they are gone, planning is the best way this wish is met.”
Mduduzi Luthuli is an investment manager at Luthuli Capital.