According to the Pew Research Center, 40% of American adults have one or more step-relatives. While many step-families get along well, for those that don’t it can get really messy and it will affect more than one family, meaning the damage, both emotionally and financially can ultimately be very widespread. This can make estate planning and financial planning for blended families a touchy and tricky subject. However, according to a recent article called “Yours, mine and ours: planning step-family finances”, there are some things you should consider in order to make the transition to a blended family a little smoother.
One of the most important things you must do as a family is to be open and honest with each other, especially when it comes to finances, which is one of the most common reasons why marriages end. Potential spouses should have a clear picture of each other’s finances, including both assets and liabilities of each spouse. Neither spouse wants to enter into a marriage based on trust only to find out that his or her spouse has a huge pile of debt that has to be paid off. Additionally, if one spouse has considerably more assets than the other spouse, a Texas couple must decide whether those will remain the separate property of the wealthier spouse (which is the default rule under Texas law) or whether the spouses want the property to become community property. In either case, it is often a good idea to speak with your Houston estate planning attorney about possibly entering into a premarital agreement before you tie the knot. This way, each spouse can be assured of how their existing property will be treated after the wedding.
Those whose marriage result in a blended family also need to implement a new estate plan. The new estate plan can address issues such as how to ensure that when one of the spouses dies, the other spouse will be financially provided for while ensuring that the deceased spouse’s children, grandchildren, etc. will still be entitled to inherit property upon the death of the surviving spouse. As a Houston estate planning attorney, I have seen firsthand the damage (both financially and emotionally) that can result from a blended family’s failure to implement a solid estate plan. For instance, if Dad remarries and ends up leaving everything to his new wife, his kids from his prior marriage will receive nothing, and when new wife dies, her kids will most likely ultimately inherit what may be left of Dad’s property. A good estate plan can make sure that new wife is provided for after Dad’s death, while ensuring that any assets left when she dies go to Dad’s kids.
Blended families face unique challenges when it comes to financial issues, and these challenges can be exacerbated if there is no plan in place to deal with them. These issues should be addressed and handled before you walk down the aisle, or they could continue to plague you for years to come.
Reference: The Kenyon (MN) Leader (December 29, 2014) “Yours, mine and ours: planning step-family finances”