First came love…. then came (the second) marriage…. and a blended family full of financial surprises! It's no secret that blended families face their share of difficulties early on in a marriage, not the least of which has to do with money. The rise of divorce, remarriage, and same-sex relationships has morphed the traditional family unit into a complex network of relatives, bringing with it a bevy of financial frustrations.
The changing face of families
Blended families are slowly becoming the norm in Canada, according to Census data released last August by Statistics Canada. All told, Stats Canada recorded 464,335 stepfamilies in 2011, a number that accounts for 12.6% of the country's nearly 3.7 million ‘couple families’ with children.
While it's difficult to generalize what a blended family looks like, it's safe to say they all deal with difficult financial decisions. While both partners bring financial resources to the relationship, they also bring their fair share of expenses. What if your new husband has saved for his kids' post-secondary education, but your children are without a college fund? Maybe your son is used to playing travel hockey, while your partner's children have never had the resources to participate in organized sports?
Welcome to the minefield of blended finances, where the money pressures are high and the resentment can run deep. While deciding how much financial separation to maintain and who should pay for what isn't easy, it's critical to your new relationship. So do yourself a favour; broach the topic before you take a return trip down the aisle.
Here's what you'll need to discuss…
- The pre-nup
First off, a pre-nup does not mean that you think your marriage is going to fail. For those embarking on a blended family, a pre-nup often makes practical sense. By the time couples enter into a second marriage, they often bring with them a mix of substantial assets and debts. What's more, most will either be paying or collecting child support. A pre-nup will provide full financial disclosure, making it easier for you to navigate the ups and downs of your newly combined incomes.
- Managing bank accounts
Think long and hard before you blend your bank account with your spouse's. The reality of the situation is that you both have your own separate expenses stemming from your past relationship. By keeping at least some of your money separate, you maintain the ability to make financial choices for your children without having to consult with your partner. What's more, there's a good chance that sharing expenses out of one joint account will be unfair to someone in the relationship. If your income and child support doesn't equal your partner's, someone is going to find themselves footing a much larger portion of any shared expenses.
A joint account makes sense for blended families if the funds within it are used for shared expenses (i.e. mortgage, utilities, insurance, etc.). As such, you'll be able to contribute to household expenses in a way that is fair and proportional to your income.
- Fair doesn't mean equal
Blended families face an inherent potential for conflict, mainly because each parent ultimately feels obligated to care for their own biological children. The best way to deal with money-induced jealousy between stepsiblings is to sit down and talk about money with your kids. Be honest; if you don't have the money, tell them. Believe it or not, kids are fully capable of understanding financial friction within a family. Even traditional families have been known to give one child more financial support than another.
If you can, strive to create some financial equity between the two halves of your family. More importantly, take pains to treat each of your children, biological or not, the same on a very emotional level.
- Don't forget to plan for the future
Remember to update your estate plan when you remarry. This involves changing the beneficiary on your RRSPs, insurance, workplace pension, etc. You'll also want to update your will and your power of attorney in order to protect your assets and your children's inheritance.
Traditionally, your assets flow to your spouse, with the intention that they will eventually be dispersed to your children. However, this isn't always the case in a second marriage. In a worst case scenario, your second spouse could decide to give all of your assets to his children, effectively ignoring your biological offspring. For this reason, you'll want to talk to a financial advisor to make sure that your estate is arranged in a way that properly allocates your funds according to your desires.
Before you make any decisions, remember to discuss them with your new partner. At the end of the day, the most important thing is to ensure that your entire family's needs are met, and that financial issues aren’t hindering your ability to grow together in a strong, unified and lovingly blended way.
GoldenGirlFinance.com is a free personal finance and education site for women.
Nothing contained herein is intended to provide personalized financial, legal or tax advice. Before implementing any financial strategy, you should obtain information and advice from your financial, legal and/or tax advisers who are fully aware of your individual circumstances.