Growing up in the 1980s, I can vividly recall what it meant to be a “traditional” family. It was still the “Leave it to Beaver” days where a husband and wife married, bought a home, had children, and worked toward financial security. (My own family shared closer resemblance to the loving yet complex web of family relationships as depicted in the Modern Family sitcom that came out many years later!)
Over the last two to three decades, shifting demographics and our changing views and attitudes have helped redefine the concept of a “traditional” family unit for many of us. The challenge is that many of our tax structures, regulations, and investments are largely intended for a “traditional” family model where a man and woman get married for life and have children. In reality, our evolving family structure is changing and so is our relationship with money and our needs for financial and estate planning.
With some thoughtful planning, there are many ways that non-traditional families can carefully plan to maintain control of their most important goals, values, and destiny when it comes to finances and estate planning. This applies not only to the same-sex couples, but also for families where there is divorce, blended families, single parents by choice, multinational families, and children born through assisted reproductive technologies. If you find that your family unit doesn’t fit the “traditional” mold, here are a few tips to consider:
Goals First, Planning Second
No financial planning can take place in a vacuum or based on assumptions without asking questions. So as a starting point, anyone considering planning for themselves and for loved ones, whether in a traditional or non-traditional relationship, should start the process by contemplating his or her top goals and concerns. Is the primary concern providing for themself? Leaving an inheritance to children? Protecting a spouse or partner? Making sure children are independent, but have a safety net if necessary? Of course, most of us don’t have just one goal, but we should start by identifying what’s important. Then we can see if it’s possible to achieve all of them, or if we need to prioritize. Ultimately, a financial plan should reflect these goals and priorities. This is a critical first step for anyone starting to engage in the financial planning process, but even more so when multiple familial relationships are potentially impacted. That may require a delicate balancing act to prioritize many competing interests. In these circumstances, it is incredibly valuable to have an impartial third-party, such as a fiduciary wealth advisor, to create a plan around those goals.
Empower Your Partner
In the absence of a will or estate planning, there are basic laws in place that govern the distribution of assets in the event of death. These “rules of intestacy” generally dictate that property will pass to spouses and children, or to parents if someone dies without a spouse or children. However, these laws generally do not provide much protection to unmarried partners or unadopted children. In these circumstances, proper estate planning becomes critical to ensure these same rights and protections for these family members. We can use estate planning tools such as wills, trusts, durable powers of attorney and health care proxies to choose who should step in for us when needed and who should receive our property.
Consider Family Dynamics
Despite the best of intentions, there are times when blended families just don’t mesh. In some cases, it just takes time, and in others, it’s never going to be smooth sailing. Matters can get considerably more complicated and sensitive when illness or even death comes into play. As an example, the death of one spouse could mean that all the assets of both families end up with the surviving spouse. That, of course, is usually not the best solution to protect all children and heirs. When bringing families and finances together, it’s important to have frank and honest discussions about what the new couple wants. Careful planning to make sure it plays out as planned can prevent a lot of misunderstanding, resentment, and drama. Again, wills, trusts, durable powers of attorney and health care proxies can permit the new couple to choose the outcome they prefer, rather than just let life (and death) happen and the chips fall where they may.
Don’t Be Afraid to Talk Pre-Nup
Sure, it’s uncomfortable, but when bringing substantial assets or children into a marriage, a pre-nuptial agreement should be strongly considered. Although it may not be the right or necessary solution in every case, it’s almost always worth the careful thought and consideration. Particularly when entering a second or third marriage, a couple needs to talk about what they have in mind in terms of financial support of one another and of their children from prior marriages and relationships. Ideally, that plan should be put in writing so that there are no misunderstandings or different recollections of what was agreed upon. If the plan is formalized in a prenuptial agreement, it will also be legally enforceable. And if you already are married but want to formalize a plan, you can implement a post-nuptial agreement.
The bottom line is that is becoming increasing more likely that today’s “modern family” doesn’t fit the one nuclear family mold. Planning then becomes both more important and much more interesting. Our team at ML&R Wealth Management is well-suited and eager to help you navigate these challenges. Please contact us today to schedule your complimentary consultation.