Blended families have an opportunity to launch new relationships and traditions, but they often face pitfalls where finances are concerned.
OKLAHOMA CITY – According to the Stepfamily Foundation, about 1,300 new stepfamilies are created every day. Based on Pew Research Center findings, 41 percent of all Americans have at least one step-relative. These blended families have an opportunity to launch new relationships and traditions, but they often face pitfalls where finances are concerned. The Oklahoma Society of Certified Public Accountants provides these tips for issues within stepfamilies and how to address them.
1. Define types of accounts. One challenge for stepfamilies can be deciding how to split finances into “yours,” “mine” or “ours.” Many remarrying couples often start out with separate accounts, which are used to pay for personal expenses, including those for any children from a previous marriage. Remarrying couples may also maintain a joint account for ongoing expenses as a couple, contributing either an equal amount every month or a percentage of each spouse’s income. Any combination of accounts can work, but spouses should be sure to clarify the ground rules up front to avoid confusion. Couples should determine how much each person will deposit in certain accounts monthly and define what expenses specific accounts cover. Because financial circumstances change, couples should consider revisiting this arrangement regularly to ensure an approach that best serves their needs. This kind of ongoing communication will help prevent misunderstandings later. It’s especially important to budget and maintain clear and updated records that include all accounts. Therefore, the couple can easily see where they stand financially.
2. Review and update documents. After remarrying, the beneficiaries named for life insurance and various financial accounts should be reviewed. Remarrying couples should create or update a durable power of attorney, living will or a healthcare proxy to designate a person to make decisions in case of incapacitation
3. Revise your will. Inheritance issues can leave children and spouses anxious about their financial futures. As a result, it’s best for a newly remarried couple to have wills and revise existing wills after the wedding in order to address important estate planning issues. Wills should set forth, as specifically as possible, what each beneficiary will inherit. This will not only help minimize potential squabbles among siblings but also between the surviving spouse and children from an earlier marriage. If you want to leave some assets to your stepchildren, it’s important to remember to include them in your will. Since they generally are not considered to be among your legal heirs, it is likely stepchildren won’t inherit if you pass away without a will. If a will says the estate is to be divided among your “children,” a court may decide if stepchildren are included. Estate planning can also be complicated when one spouse wants to provide for a surviving spouse and give their children access to their inheritance as soon as possible.
4. Consult a CPA – A CPA can advise the best options to use such as life insurance, or even trusts, to ensure all of your beneficiaries’ needs are met. It will also help to ensure greater family harmony when you navigate financial considerations for blended families. If you don’t have one, get a free referral and free 30-minute consultation at www.FindYourCPA.com.