The Pew Research Center reports that four in ten American adults have at least one steprelative, defined as a stepparent, a step-or-half sibling or a stepchild, in their family. While the Pew study says that many stepfamilies operate harmoniously, it also notes that adults "feel a stronger sense of obligation to their biological family members than they do to their step kin."
That is one reason why blended family finances can get so messy.
Couples planning to blend families often have to make financial arrangements that respect previous relationships with ex-spouses and their families. Issues range from childcare and eldercare to potentially complex matters involving businesses, investment assets and real estate. That's why involving trained experts in stepfamily financial planning is a must.
Here's a basic checklist of issues and solutions potential spouses and partners should consider:
Start with all cards on the table. Today's first-time marriages or partnerships alone can introduce some staggering financial variables -- business and inheritance issues, college debt, consumer debt or even past bankruptcies. Couples planning stepfamilies face even more complications. But all couples need to start with a critical first step -- sharing personal information with a potential impact on finances. Start with the following:
- Current credit reports and credit scores. Extensive loans or bad credit for one or both partners can endanger future purchasing plans for auto, home or tuition. It's also important to share information about personal or cosigned loans to family and friends.
- Financial planners. The Association for Financial Counseling Planning and Education and Certified Financial Planner Board of Standards are two nationwide organizations that can identify advisors in your area.
Address problems before move-in. Most experts tell you it's best to start any new marriage or partnership with a clean slate - or a slate that's as clean as you can make it. That's doubly true with stepfamilies. As many income, asset, debt, child custody, estate and business issues as possible should be identified and solutions put in place before the family is legally joined.
Assign family responsibilities and roles. Blended families also mean blended parenting styles. It's important the couple address a standard set of roles and responsibilities for all members of the blended family so there's fairness in matters of money and behavior. Ex-spouses and partners may also need to be consulted. For example, if children will be living at home as minors or post-college, it's worth discussing and deciding equal responsibilities for chores, academic expectations, rent or other roles that help a family operate.
Make a fresh estate plan. Financial experts say it's time to review all money issues whenever you face a major life event, and remarriage or re-partnership certainly qualifies. Even if the individuals have their own separate estate matters in order, stepfamily issues restart the planning clock on everything. It's a potentially long list of possibilities:
- Prenuptial planning to assure a fair split of assets in divorce;
- Educational planning for younger kids;
- Special needs planning for children now part of the blended family;
- Eldercare issues for the couple, their parents, former in-laws or other relatives one or both spouses are responsible for;
- Clarifying inheritance issues for current and future heirs, including potential creation of trusts or other vehicles to ensure inheritance and income needs for various family members;
- Business transfer planning for spouses and their specific heirs;
- Preserving or revising family philanthropy; and
- Minimizing impact of estate and inheritance taxes.
Plan -- or re-plan -- your retirement. You may have planned a great retirement with a former spouse or on your own, but what if your future spouse hasn't? Whatever steps you've both taken toward retirement, you need to review your strategies so you can retire comfortably together. Consider:
- Your respective time to retirement.
- Whether one or both of you need to sell or wind down a business.
- Whether one or both of you will want or need to work past retirement.
- Your health.
- Family needs that might change or delay your current retirement plans.
Bottom line: Money issues complicate all relationships. But stepfamilies have unique, detailed planning needs that should be discussed and settled before marriage or move-in.
Jason Alderman directs Visa's financial education programs. To Follow Practical Money Skills on Twitter: www.twitter.com/PracticalMoney