Fair financial accounting and a prenup are the secret ingredients for a successful second marriage and happy blended family.
Avoid future family disputes by making a thorough financial accounting of all of your liquid and fixed assets and signing a pre nuptial agreement.
Are you ready to tie the knot for a second time? If so, it’s time to work out what you will need to do with your financial assets. If the two of you don’t sit down together and make a proper financial accounting before the wedding, instead of getting the The Brady Bunch, the story of a blended family where every episode ended happily ever after, you might end up with a domestic nightmare as each stepchild will have their own claim against each other. Blended families are extremely prone to the risk of disputes if financial assets are not handled properly and exactly in advance, leading to fights over anything, ranging from inheriting a house to items of jewelry.
Financial accounting includes a variety of issues, from the ownership of fixed assets to signing a prenup. Of course, every family is different and has its unique concerns, but there is one piece of advice that is applicable to all: talk. Before and after marriage, both spouses should be open about their current fiscal situation and future expectations.
Some topics that should be discussed include:
Individual assets and liabilities - what savings and debts is each partner bringing into the marriage? This includes all of the anticipated streams of income (including salary, child support from ex-spouses, and gifts from family members).
Living situation – will you move into one of the currently owned/rented homes, or will you sell both current homes and rent or buy a joint one?
Children – If this is joining two separate families, have candid discussions about past expectations and future. Are both sets of children getting equal material assistance?
Inheritances – will you sign a pre-nuptial agreement, or revise your will to make sure all children receive a fair share of inheritances? Providing for step-children, natural children, and joint children can be a tricky issue, so make sure to get professional advice to minimize unpleasant feelings after a parent’s demise. Consider a QTIP (qualified terminable interest property trust), an estate plan where your new spouse will receive income from a trust’s principal after you die, while your children from a first marriage are entitled to the remaining principal upon the death of the new spouse. This way, your new spouse’s needs are accounted for, while your children receive an inheritance.
While a second marriage is a happy event, be careful to prepare the groundwork properly to avoid unpleasant financial surprises. While money can’t buy happiness, open communication and honest thoughts about money may help alleviate sources of strife in a blended family.
Disclaimer: This article is for educational purposes and is not a substitute for investment advice that takes into account each individual’s special position and needs. Past performance is no guarantee of future returns.