The Brady Bunch remains the epitome of the blended family. But while Carol, Mike and the kids worried about middle-child syndrome and changing voices, one thing they never seemed to fret over was money.
That's because their stepfamily finances were about as realistic as the bright green turf in their backyard. These days, one in three marriages involves kids from previous relationships--and almost half of spouses in blended unions say their new partner brought financial baggage, such as debt, into the marriage, according to one recent study from Allianz.
Combining households is hard enough for newlyweds. But "when you merge families and finances, often you're stepping into a hornet's nest right away," says Jeannette Lofas, Ph.D., president and founder of the Stepfamily Foundation, Inc. counseling center. Factor in complexities such as child support or real estate still co-owned with exes, and it's clear that if you don't tackle financial topics head-on, they pose a threat to your relationship.
To avoid money or marriage problems down the road, "you have to do the hard work before you go in," Lofas says. That means sitting down with your soon-to-be spouse and asking some tough questions. Don't get hitched until you hammer out these seven below.
Should We Pool Money or Keep Things Separate?
This is probably the biggest question facing any couple, says Kaleb McCarty, founder and CEO of Elite Wealth Advisors LLC in Sarasota, Florida. He typically recommends combining all accounts for two reasons: It's easier to manage your budget when you're sharing everything, and it eliminates most arguments about who is paying for what because everything comes out of joint funds. "Making your finances transparent and giving each partner access is often the best course of action," he says.
On the other hand, there's a strong argument for keeping things separate, save for a joint household account for day-to-day expenses both partners contribute to. If each spouse comes into the marriage with a variety of other financial accounts and assets, from IRAs to stocks to a college savings 529, it may be unwise to combine them because of tax implications or the risk of yielding lower returns, says McCarty.
Maintaining mostly separate accounts also eliminates the potential risk of your partner's ex getting access to your shared accounts. If this is an issue, consider discussing that with a financial planner, and even an attorney, before deciding to stay separate or pool your money, suggests McCarty.
What Are Our Financial Priorities and Goals?
Instigating a frank discussion about what you want to do with your paychecks will help reveal what your priorities are and if you need to make compromises or adjustments so your goals line up as a couple, says Lofas.
Start with this exercise: You and your partner each write down your top financial aspirations, then rate them in relative importance and how you plan to make them happen. If your lists reveal big differences--say you're all about building your 401(k) for retirement while he's saving for a down payment on his dream home--you might need to discuss scaling back your goals or finding a way to make both happen.
"Blended families are typically older when they start their marriage, and that means they have less time to achieve their financial objectives, like saving for their kids' college or retirement," points out McCarty. "This conversation might bring up some tough realities, but they have to be addressed so you're on the same page."
What Is Our Monthly and Yearly Budget?
Budgeting for a nontraditional family involves more than just adding up two salaries and subtracting monthly expenses. "Blended family budgeting can be nuanced," McCarty says. It's important to determine who is paying for child-related extras, like the cost of sports equipment, birthday gifts and allowances (and how much each child should receive, assuming you both agree that an allowance is in the cards).
As for bigger child-related expenses, "If they are his kids, does that mean he automatically pays for them?" asks Lofas, who recommends her clients figure out how much each will contribute and the contingencies. She even advises they think through other elements, such as major house repairs. "If you're moving into the wife's house and a year later you need a $14,000 roof, who is going to pay for that?"
The other thing to go over is how much each partner will be contributing to the family budget. Should it be strictly 50-50? Will the split reflect each spouse's take-home pay or the fact that one partner is also footing the bill for child-related expenses or support payments? As tedious as it sounds, figuring out the details now can save you headaches later on.
How Much Debt Do We Really Have?
This is a big one, since many people are reluctant to disclose sources of debt, says Lofas. "Debt can challenge any relationship," adds McCarty, who recommends that couples make it a top priority to reduce any and all money owed--whether it's outstanding student loans or car payments or credit card debt.
While there's no single right way to whittle away debt, McCarty emphasizes, spouses need to reach an agreement: Is the person who brought the debt into the relationship responsible for paying it off--or will you pool your money and tackle it together? Go into the marriage without ironing this out, and depending on the state you live in, you might find yourself liable for any further debt your partner accrues . . . and your own credit rating can take an unexpected hit.
Where Will Our Money Go When We Die?
Estate planning takes on new layers of complexity when you have a blended family. An estate planning attorney can help spouses determine how to create a will that clearly states who will inherit what, from cash to property to jewelry and other possessions. At the least, McCarty recommends that couples document each partner's assets and net worth at the time of marriage and update the beneficiaries.
And make sure you take proper care of loved ones and plan for unexpected situations. "If he leaves all his money to his kids, is the wife going to have to leave the house she's been living in after giving up hers via mutual decision?" says Lofas. "Women often get the short end of the stick, so make sure that these eventualities have been thought through."
While the will should be an essential foundation of any estate plan, McCarty also advises drafting a financial power of attorney and/or a healthcare power of attorney in the event one or both partners become incapacitated and unable to make financial or medical decisions.
How Should We File Our Taxes?
Taxes can also become more complicated when you're a blended family, McCarty says, and how much more confusing it is depends on your incomes, assets and where you live. He recommends that families consult a CPA or tax professional to figure out how and if you can claim your children and stepchildren as dependents and if it's better to file jointly or separately. Weigh the options carefully--they could mean more money in your paychecks or a bigger refund.
Would a Prenup Be a Smart Idea?
Bringing up the possibility of having a prenuptial agreement might be awkward, but it needs to be part of the conversation. "Prenups often get a bad rap, because some couples think they either start off the marriage on the wrong foot or show a lack of trust," McCarty says.
Traditionally, prenups were used to protect the spouse with the most money. But now they are brokered more and more by blended families of all incomes as a way to legally protect both partners' best interests and those of their kids. A prenup "can be a great tool that goes hand-in-hand with a solid estate plan, covering all of your bases and making sure your financial wishes are met," says McCarty.
So while even mentioning the P word might seem like you're putting a curse on the marriage, it's worth talking about--and because it clarifies so many things from a legal perspective, drawing one up might be the financially responsible thing to do.
This post originally appeared on LearnVest.
LearnVest Planning Services is a registered investment adviser and subsidiary of LearnVest, Inc., that provides financial plans for its clients. LearnVest, Inc., is wholly owned by NM Planning, LLC, a subsidiary of The Northwestern Mutual Life Insurance Company. Information shown is for illustrative purposes only and is not intended as investment, legal or tax planning advice. Please consult a financial adviser, attorney or tax specialist for advice specific to your financial situation. Unless specifically identified as such, the individuals interviewed or quoted in this piece are neither clients, employees nor affiliates of LearnVest Planning Services, and the views expressed are their own. LearnVest Planning Services and any third parties listed, linked to or otherwise appearing in this message are separate and unaffiliated and are not responsible for each other's products, services or policies.