Latest news with #blendedfamilies
Forbes
30-05-2025
- Business
- Forbes
Financial Planning For Blended Families
A multi-ethnic blended family at the park on a sunny day, sitting together on the ground on a ... More blanket, laughing. The mother is African-American and father is Caucasian. Their two little boys are twins, almost 3 years old. The three girls, 11 to 15 years old, are from prior relationships. In my experience, many families I meet don't fit the traditional nuclear family dynamic. According to Pew Research, approximately 42% of all adults have a stepparent, step or half sibling, or a stepchild. However, much of the financial literature out there is not tailored to these blended families. Blended families include an adult person or couple and all the children from current and all prior relationships. I am not only part of this 42% of adults in blended families, but I also have a close look inside of many types of family dynamics as a financial planner. This is how blended families can financially plan for their family's goals. Working through financial dynamics in a blended family is naturally more complicated than working through differences in financial priorities in a traditional nuclear family. For starters, many blended families emerge because of divorce or death. This can create strain between branches of the family because of not only differences in opinions, but also potential dislike or open hostility. When attempting to understand a blended family's financial dynamics, it's important to understand: Let's go through a recent example of some of these dynamics at play. I was recently speaking with a widow who had two children from her first marriage and two from her second marriage. She had worked very hard her whole life but did not have nearly as many assets as her second husband, who was extremely well-off before she met him. Since the woman's first two children were already adults when she got married the second time, they did not have a significant relationship with her second husband. As a result, the second husband set up trusts to make sure the widow would be financially taken care of for her life but upon her passing, everything would go to the two children they shared. The widow loved all her children dearly and valued fairness so she wanted her children from her first marriage to be taken care of and she made them the sole beneficiaries of her own estate, knowing that her other children would be receiving a large sum from their father's assets when she died. If she'd done no planning, her assets would have likely been divided into four equal parts after a lengthy probate process. Particularly while there are young children at home, budgeting as a blended family can be difficult. If child support and alimony are at play, the most important first step is to figure out what all the costs associated with household dependents are. Child support is generally intended to provide food, shelter, clothing, and healthcare. In other words, their basic needs. But a child may have additional costs, associated with things like sports, the arts, hobbies, tutoring, and private schooling. Once those associated costs are figured out, then all involved parents can start to assess each item, figure out if cuts are necessary, and negotiate who will be paying for what. Then, the primary caretakers should start to figure in their own fixed and variable expenses. I've seen blended families where one person feels like they are at fault for a divorce, so they end up covering all costs associated with mutual children, in addition to paying child support and alimony. Years later, this became a significant point of contention when that person's income was greatly reduced due to pursuing a new career path. This is a big reason why open communication around priorities and available budget is critical to continue throughout the life of shared children. Once you understand the portion of the budget you'll be responsible for, it's critical to ensure you have sufficient emergency reserves. Your emergency reserves should cover three to six months of expenses you are responsible for and should be made up of cash or cash alternatives. These alternatives can include money market funds or high yield savings accounts. If your expenses are $4,000 per month, you should have $12,000 to $24,000 in reserve. If you are in a two-income household, you have job security, and your cash flows are stable, you should consider having a three-month reserve. If you are in a one-income household, have unpredictable cash flows, or are feeling job insecurity, consider holding a six-month reserve. Some large milestones in a child's life that might require financial planning include goals like education funding, gifting funds to support in buying a home or business and paying for a wedding. I frequently meet parents in blended families who have different priorities around these types of goals. Some may have neither the discipline nor the motivation to save for any of these goals whereas it may be a high priority for others. One easy way to make this type of planning about the child and not the dynamics of the adults in their lives could be to set up accounts in the child's name, like a 529 College Savings Plan or a Uniform Transfers to Minors Account. This way, parents, stepparents, grandparents, aunts, uncles and older siblings can all contribute directly to whoever may need the planning. When there are young children dependent on an adult for income or savings toward financial goals, insurance and other protection plans are critical to include in the financial picture. I've seen some divorces where life insurance was mandated as a stipulation of the divorce agreement, but in the case of death, divorces without this mandate, and parents who were never married, many do not maintain sufficient insurance coverage. Insurance protection can be used to ensure continued child support, education funding, lifestyle expenses, and replacement of debt. Having an estate plan in place is especially crucial for blended families. Estate planning involves designating your wishes in the event you die or become incapacitated, including who becomes a dependent child's caretaker and conservator. When die or become incapacitated without a properly constructed estate plan, including a trust, then a lengthy, costly, and public court proceeding takes place. Additionally, like in the earlier example, it's critical to consider the impact of changing wealth over time. For many families, parents can become wealthier as they get older, potentially causing children from later marriages to end up with more unless it gets planned for in the estate planning process. The reverse could also be true with financial setbacks, illnesses, and injuries. Financial planning for blended families requires a thoughtful approach that considers unique dynamics, priorities, and relationships. Open communication and proactive planning are vital to navigating financial challenges while fostering harmony in blended families.
Forbes
09-05-2025
- General
- Forbes
Blended Families, Inheritance And Preventable Conflicts
With the U.S. divorce rate at about half of all marriages, blended families are a part of society's landscape. Many divorced parents do remarry and have to contend with working out the complexities of relationships among their children. Some siblings come from a prior marriage of one parent, others from the other parent's past. Some are the product of the second or third marriage. It gets complicated. What we see at where we consult with families, is that any underlying conflicts seem to surface when one or both parents age and need care. And these conflicts can be explosive after a parent or step-parent passes. Jealousy can rear its ugly head. And sad injustice can come out of it. Here's one real life example: Unfairness To The Caregiving Sibling Faithful Step-Daughter (FS) loved her step-dad who had always treated her with kindness and love. He was widowed and lived alone. As his health deteriorated, he needed care, part time at first and then full time as he grew more frail. FS quit her job, moved in to be the caregiver and dad was happy with this. Theirs was a good relationship to the end. He had dementia and needed a lot of help. FS had two step-sisters, from dad's first marriage. All got along well. FS lived closer to her dad and she assumed the role of primary caregiver. The sisters accepted this and did not question her, seemingly appreciative of her considerable work caring for their father. They participated very little in caregiving, leaving the responsibility to FS. There were no written agreements about caregiving. FS received support from dad in exchange for her work, as she did live with him, but no formal salary. The Conflict Woman getting bad news that she is evicted After dad passed, the truth of how the step-sisters veiwed FS surfaced. He had left most of his estate to his daughters by his first marriage. FS did not receive anything close to a proportionate share. Step-sisters decided to sell dad's home soon after he passed. They gave FS thirty days to move out, once the home was listed for sale. She had nowhere to go and did not have money to buy a place for herself. Unfair? Certainly! Were the step-sisters motivated by greed? That is unclear but something motivated them to ignore the work FS had done in making their dad's last two years safe and peaceful in his own home. FS thought they were jealous of her close relationship with their dad and this was their way of saying so. They would have had a choice to make things right for FS but did nothing. FS was crushed and terrified. Eventually she got a job as a paid caregiver, but she never had any financial security after that. Could This Unfair Result Have Been Prevented? We believe it could have been prevented by careful planning and legal documents. One thing FS needed to do at the outset, before quitting her job, was to ask dad to accommodate her with a gift in his estate plan, at least, or a written contract for her services, spelling out a fair payment plan. FS did not think about her future. Dad did not think about her future either. To be sure, the ask would have been uncomfortable but nothing like the uncomfortable realization that FS would potentially be left with so little after her caregiving role ended. As her step dad's dementia progressed, it was too late to ask him to make any consideration for her in his will and trust. Facing What We Don't Want To Face It is not just in blended families that we see conflicts about the sacrifices caregivers make for aging parents. But conflicts can be worsened when underlying emotions, never verbalized, emerge after the caregiving ends. For anyone who takes on the role of caregiver, particularly if you must quit a paid job to do this, be sure you are not blinded by your own loving sense of duty. The cost of paid caregiving is substantial and rising. According to the most recent Genworth Cost of Care Survey, the national annual median cost in 2024 for a full-time in-home caregiver was $77, 792. Doing the job for free is fine if you can afford it and you have a secure future afterwards. If not, it is best to communicate the value of what you propose doing to all concerned. Make a fair arrangement for yourself. Family Meetings What FS could have done before assuming the substantial role she planned to undertake was to speak to her step-dad privately about a plan for her as well as for him. Once that was agreed upon, dad could have called a family meeting to let everyone know what he wanted to do. That would likely have prevented the shock FS experienced after he died in being evicted, left with insufficient income and feeling the unfairness she felt. Her dad probably would not have wanted that but apparently, he never thought it through and neither did FS. Communication to all in the family about who is doing work is critical to avoiding bad outcomes and the injustice of caregiving without any recognition of its dollar value. The Takeaways 1. Talk it through If you or any sibling in your family, blended or not, is likely to take on a caregiving role, bring up the subject for discussion with aging parents. Their resources would be used to pay for care if no adult child could assist when the time came. Unspoken expectations about 'duty' need to be aired openly. 2. Compensating caregivers If you or your aging loved ones do not have the resources to meet the high cost of care in a supervised environment like assisted living or a nursing home, open the discussion in the family about a plan to fill that potential caregiving need. Family is typically the source of unpaid caregiving when the elder in need does not go to another living environment. How can the family make that fair to the one who would do the work? 3. Change the estate plan If the aging parents do not have high income, but their wealth in their paid for home, seek their consent to amend their estate plan to compensate a caregiving family member for the labor of caregiving after the elder passes. Then seek the advice of the parents' estate planning attorney or your own to ensure that consideration is provided, when possible, for the work the caregiver has done. The aging parents must be competent to change or add to a will and trust. Don't wait until they have cognitive impairment and could be found incapacitated to make such important decisions. Act at the first sign of physical/cognitive need for help.
