Lehigh Valley Woman – Finance Section – August/September 2013
by Laurie A. Siebert, CPA, CFP®, AEP® Vice President, Valley National Financial Advisors
RELATED PODCAST: Life Phases for Blended Families (Listen/Download)
What is a blended family?
The statistics are high for divorce and consequently, we are seeing more and more blended families. It may be a little less complicated blending a family if one of the parties doesn’t have children but the newly married couple may have a child together and what may have seemed to be less complicated can become very complicated, at least to the “prior” child. Emotional issues abound, especially for children. Financial implications of what this all means only exacerbate the situation. Taking hold of that can alleviate conflict in the future.
What can you do if you happen to fall into this situation?
Start by having open conversations about the emotional and financial issues involved. Conversations around who will be physically responsible for the children, who will be financially responsible and for how long? What if new children come into the relationship? How will the support of the prior children be affected? How will you split up assets – will they go to your new spouse, their children, your children or your children together?
Having a statement of your values and goals relating to the financial support of the family will help. Take a “picture” of each of your own current situations so that you have a financial benchmark. As you then think through the questions and answers that may arise for the following phases, you will have guidance on how to structure everything now and then if necessary, revise or tweak as you move through the phases.
Do a Life Phase inventory
Phase 1 – Near future with children. Discuss how you want the financial responsibility to look moving forward. Keep in mind that one spouse’s children may be younger and may require additional financial support during this period and how that will be allocated. What if there is no child support from the non-custodial parent? What will happen if you have children together?
Phase 2 – Future after child support. Discuss how you want each other financially supported during your marriage; i.e., working toward saving together for your retirement or still keeping some separation for your respective heirs. Do you keep your pre-marriage accounts separate and have a new joint account? Or, do you continue to keep everything separate?
Phase 3 – Surviving spouse options. Discuss the survivor’s right to live in the home without sacrificing separate estate appreciation for heirs or forcing the survivor to vacate or sell the property. What do you plan for the retirement accounts during and after the marriage and who are the beneficiaries? You may disinherit your own children if the surviving spouse is the primary beneficiary because they will be in control of how the assets are used or passed to heirs.
Phase 4 – Heirs. You can use life insurance to replace an inheritance you may have wanted your first family to have while at the same time, simplifying the current family’s needs. Rights to joint property or lifetime rights in property through a trust may be controlled through the survivor’s will or through the deceased’s trust. Which assets get used first if you plan to leave assets to the surviving children?
You may accomplish your objectives using a trust that helps you retain some control over the eventual distribution of your assets where you want some, or all of your blended family to benefit. In particular, using a trust with a corporate trustee will keep the parties at arms’ length, avoiding possible conflicts after your death. Finding an independent, unbiased, corporate trustee might be critical in these cases. Work with your attorney to determine what is best for you.
Recently, Jane A. Kapinas, joined Valley National Financial Advisors as Vice President and Trust Representative for Valley National Trust Services, a Trust Representative Office of National Advisors Trust Company, FSB. Jane oversees and interfaces with the client, their legal professionals and the trust company to coordinate services supporting the client’s needs and goals such as planning for blended families. See the “Women in Profile” section for more information about Jane.
Any questions? Email Jane Kapinas at jkapinas@valleynationalgroup.com or me at lsiebert@valleynationalgroup.com and mention this article.
Be proactive, not reactive, and make the best of your choices.
IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication, including any attachments, is not intended or written to be used, and cannot be used, for the purpose of 1. avoiding penalties under the Internal Revenue Code or 2. promoting, marketing, or recommending to another party any transaction or matter addressed herein. Valley National Financial Advisors is the marketing name for Valley National Group, Inc. and its affiliates. Securities offered through Valley National Investments, Inc member FINRA, SIPC, 1655 Valley Center Pkwy, Suite 100, Bethlehem, Pa 18017 (800) 383-8297.
