Did you know that September 16 is National Stepfamily Day? We prefer the term “Blended Families’, rather than conjuring up Cinderella’s wicked stepmother, or the wicked queen of Snow White fame.
When you decide to remarry, especially either of you have children, here are some tips to create a solid foundation for your continuing relationship.
Consider a Prenuptial Agreement
When you have your own assets, intending to pass them on to your children, and your new spouse has the same- a prenuptial agreement can be particularly helpful. Honest and open communication about money and what came before, is an important part of a new relationship so it can be be built on trust and fairness.
(For help here, email me for a copy of “How to Talk to Your Honey about Money”)
If either or both of you have gone through a divorce, you’ll want to avoid that contentious negotiation about dividing assets and protect each other the best you can. Consider what’s in those divorce settlements. Receiving alimony likely will end with remarriage, but the obligation to pay a former spouse does not end. Child support continues, and life insurance beneficiary designations may need to remain in place. Many prenups will state that premarital assets, what you own before this marriage, may go to the children, but assets you acquire during the marriage, are split between you.
States have their own rules, most requiring that a half or a third of marital assets pass to a surviving spouse. It’s important that this is specifically addressed in the agreement, to avoid problems later.
Update Estate Planning Documents
It’s important to do this after divorce whether you remarry or not. All of your legal and financial documents, account titles, and beneficiary designations should be updated. Who should act as your health care proxy? Who is the beneficiary of your life insurance policy? Etc.
Wills: Do you have a will? A will states your wishes about who gets what when you pass away. You’ll want to make certain that your former spouse is not still your beneficiary! If your children are still minors, who will act as their Guardian?
Your children are the ‘natural objects of your bounty’- a legal concept. But your stepchildren, however close your bond with them is, are not. If you want to leave something to a stepchild, you need to list it specifically.
Do you have a Living Trust? Review the terms of the Trust and who is acting as Trustee.
If you don’t have a Trust, consider putting one in place.
Trusts can be especially useful for blended families. You can ensure that your assets benefit your surviving spouse during his/her lifetime, while providing that what remains after the spouse’s death passes to your own kids. Consider choosing an independent, neutral trustee, to minimize friction for everyone.
Check Beneficiary Designations
Review the beneficiary designations on 401(k) accounts, IRA’s and other retirement accounts, life insurance policies, or any account with a directly named beneficiary. These assets pass outside of your will, and must be separately updated. Your prior divorce does not necessarily revoke a designation of an ex-spouse as a beneficiary on everything. Your prior settlement may give retirement assets to your ex- and these cannot legally be revoked. Spousal rights in retirement plans governed by the Employee Retirement Income Security Act of 1974 (ERISA) are subject to special rules and may require your new spouse to sign off if you want your 401(k) to go to your children.
Consider Life Insurance
Life insurance can be a valuable tool to create an inheritance for your new spouse and your children. It’s not uncommon for a pre-existing policy to name your former spouse as beneficiary as part of the settlement, perhaps to secure child support payments. A new Life insurance policy can create the funds to benefit everyone you wish- your kids, your new step-kids, and anyone else.
Family structure is increasingly fluid. As your family structure changes, it is important to make sure that your estate and financial plans reflect your these dynamics. Your financial planner and estate planning attorney can help you take a holistic approach to your future, so you can enjoy the present.
If you need guidance on securing your financial future, contact me at adrienne@adriennegrace.com or schedule your free Financial Clarity session at www.calendly.com/contactAGrace to get started.
