Remarriage & Blended Families
Yes, we have all heard the divorce statistics – nearly 50% of couples in the U.S. end their first marriage in divorce. However, while these couples give up hope for their partner, they did not necessary give up on the institution of marriage. The majority of people who have divorced (close to 80%) go on to marry again. On average, they remarry just less than 5 years after divorcing and younger adults tend to remarry more quickly than older adults.
While blended families are extremely commonplace today (over 50% of U.S. families!), the financial implications (and risks) for you and your children increase exponentially! Who will take care of your children financially and what happens to YOUR financial assets in the event of your marriage dissolution…or death? What are the financial ramifications to your estate, your finances and your children? You may be surprised!
Blended Family Statistics
– Over 50% of US families are remarried or re-coupled!
– Re-marriage has become commonplace: 79% of women and 89% of men will marry again within 5 years
– 43% of marriages today in America involve a 2nd or 3rd (re)marriage
– 68% of re-marriages involve children from prior marriages 2,100 new blended families are formed EVERY DAY in America
– Over 65% of Americans are now a stepparent, a stepchild, a stepsibling, step-grandparent or touched directly by a stepfamily scenario
While poor financial decisions are often made during a first divorce, failing to adequately plan, prepare and protect your estate in a remarriage (and/or blended family situation) can result in catastrophic financial consequences to you and your children.
The “Five Financial Pitfalls” of Remarriage & Blended Families
1) Separate vs. Community Property – Going into the marriage with “Separate Property” assets is one thing….keeping it “separate” is quiet another! A thorough understanding of separate vs community property from a legal perspective is critical. While often unintentional, many critical errors occur when assets are co-mingled or “re-characterized” over the course of a marriage. (See “Understanding Separate Property” in the Articles section of my website).
2) Wills & Trusts (or lack thereof) – Without a Will…the State of Texas will determine how your estate is distributed and to whom. Without a Will in Texas, half of your community property estate may go your spouse and half to your children (it is critical to understand probate laws, account titling and asset characterization issues!) Even if you have a Will, family situations and dynamics often change and evolve (especially with re-marriage and blended families). Children can easily be “disinherited” within blended families (children from prior marriages). Estate planning and Wills should be viewed as “living documents” and should be updated as your situation changes.
3) Beneficiary Elections – Retirement accounts (IRA, 401(k), etc), annuities and life insurance death benefits pass directly to the listed beneficiaries! Ensuring you have the proper beneficiaries listed on these accounts is critical. Your Will and/or estate plan may have NO impact or discretion as to how (or to whom) these assets pass at your death!
4) Titling of Assets – Once again, your Will or estate plan may have NO impact or discretion as to how (or whom) these assets pass at your death if account ownership is titled incorrectly or inappropriately.
5) Gifting & Inheritance Issues – Assets acquired during the marriage through “gift or inheritance” should be considered separate property. However, intentional or unintentional commingling or re-characterization of assets which have been gifted to you or inherited by you could jeopardize this “separate property” characterization!
While couples can always consider and enter into a Pre-nuptial or Post-nuptial agreement, often times simple planning and estate structuring can provide sufficient planning and protection for many of these concerns and issues.
For more information about preparing for divorce or re-marriage and how to protect yourself, your assets and your family, please contact me today!
DMJ & Associates is an independent wealth planning firm, dedicated to providing clients with exceptional retirement and estate planning services.