From The Brady Bunch to Modern Family, blended families have served as the comedic premise for generations of television programs. But when it comes to aligning what may be vastly different financial values, attitudes, behaviors and resources, merging families is nothing to take lightly. Done right, it requires careful planning and a great deal of open and honest dialogue.
Keep in mind that both you and your new spouse probably have your own ideas about spending and saving. You may be entering this new marriage with wildly dissimilar financial profiles – one of you may be debt-laden while the other brings extensive assets and income to the table. One or both of you may have child support commitments from a previous marriage. And your credit histories may be at opposite ends of the spectrum.
No place for financial secrets
While frank financial conversations can sometimes be uncomfortable, having a clear understanding of your new, complete financial picture and devising a basic saving, spending and investing plan that you all can live with will help stave off potential future conflicts and minimize the likelihood of unexpected and unwelcome surprises.
Not only must spouses merging two families plan for increasing day-to-day budgetary expenses such as food, clothing and entertainment, but also significantly higher future costs. You may have started putting money away for your child’s college tuition when they were very young, while your new spouse has little or nothing saved to fund his/her teenager’s education. And all these new costs have the ability to quickly derail long-term retirement savings strategies, as assets previously earmarked towards retirement begin to shift towards shorter-term needs.
More stuff – more challenges
More people mean more cars (and car insurance), possibly multiple homes, and more opportunity for an unexpected financial emergency. As a result, you may want to try to build a more robust emergency fund to provide your family with a greater buffer to weather any financial storms. Your tax situation may also significantly change depending on who is and who isn’t a legally defined “dependent,” so you should talk to your tax attorney well in advance to determine how this life change may impact your IRS obligation. And a new family may also necessitate a wholesale rethinking of your life insurance strategy – both in the amount of coverage you have as well as your beneficiary designations on any existing policies. Your SunTrust advisor can help you address these and a host of other planning issues.
Even if your assets aren’t extensive, you may want to explore estate planning options with your advisor, particularly if you have grown children from one marriage as well as younger children with your new spouse. There are a multitude of strategies using insurance and trusts that can help ensure your assets are ultimately distributed according to your wishes in an effort to minimize potential tensions between family members.
Financial disputes always have been, and likely always will be, one of the leading sources of marital tension. For blended families, this can be doubly true. Whether you choose to completely co-mingle all your finances or opt for a “his, hers and ours” three bucket strategy, the most important thing is to ensure that both partners are working together to achieve common goals with extensive communication and absolute transparency. After all, marriage isn’t just a legal commitment; it’s a financial one as well.