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Yours, Mine And Ours: Planning Step-family Finances

Yours, Mine And Ours: Planning Step-family Finances

By Carla Hindman
Guest Financial Columnist

Welcome to a world where a ‘modern family’ is considered the new normal.

According to the most recent (2011), Canadian census on families and living arrangements, blended families, consisting of a couple and their children from current and previous relationships, represent one in eight families with children in Canada. But when it comes to money matters is it yours, mine or ours?

Couples planning to blend families often have to make financial arrangements that consider previous relationships with their ex-spouses and their families. Issues range from childcare and eldercare, to potentially complex matters involving business, investment assets and real estate. So how do you blend the money in the blended family?

Here’s a basic checklist of issues and solutions, potential spouses and partners may consider before amalgamating family finances:

Start with all cards on the table. Today’s first-time marriages or partnerships can introduce some staggering financial variables: business and inheritance issues; student debt; consumer debt; or even past bankruptcies. Couples planning stepfamilies face even more complications. But all couples need to start with a critical first step – sharing personal information that may have a potential impact on finances. Start with the following:

  • Current credit reports and credit scores. Extensive loans or bad credit for one or both partners can endanger future purchasing plans for cars, home or tuition. It’s also important to share information about personal or co-signed loans to family and friends.
  • Assets and liabilities. Potential spouses or partners should know each other’s financial assets and liabilities and any issues connected with them. As mentioned above, debt and credit issues may be a problem, but if one spouse has extensive assets, it’s important to clarify whether those assets will be shared legally, or promised to others.
  • Legal issues. If divorce, child custody, foreclosure, bankruptcy, or any other civil or criminal legal proceedings are pending against either partner, or members of their families, full disclosure is essential.
  • Business and estate issues. If potential spouses or partners have significant estate or business assets assigned to children, former spouses or family members, those commitments need to be factored into the finances of the planned marriage or partnership.

Bring in professional expertise. Beyond disclosure, it’s good to have qualified professionals who have specific expertise with blended families and their many unique issues. Both partners should start by bringing any existing advisors into the discussion. The next step would be hiring a financial planner.

Financial planners. Advice is critical because many financial decisions can have long-term, costly implications on the new family. There are many websites that can help you find advisors in your area, such as the Financial Advisors Association of Canada (ouradvisor.ca/).

Separate Finances: Many experts recommend that couples in second or third relationships keep their finances separate, especially when children are involved. Consider creating “yours” “mine” and “ours” accounts when configuring the finances.

Plan Early. Most experts tell you, it’s best to start any new marriage or partnership with a clean slate – or a slate that’s as clean as you can make it. That’s doubly true with stepfamilies. It’s important for blended families to be clear about their finances from the get-go, and put solutions in place before the family is legally joined.

Make a fresh estate plan. Financial experts say that a major life event is a good time to review all money issues, and remarriage or re-partnership certainly qualifies. Even if the individuals have their own separate estate matters in order, creating a stepfamily can restart the planning clock.

Plan – or re-plan – your retirement. You may have planned a great retirement with a former spouse or on your own, but what if your future spouse hasn’t? Whatever steps you’ve both taken toward retirement, you need to review your strategies so you can retire comfortably together.

Money issues complicate all relationships. But stepfamilies have unique, detailed planning needs that should be discussed and settled before marriage or move-in.

Carla Hindman is the Director of Financial Education at Visa Canada.

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