Communication is always the key to good
financial planning, but when it comes to the intricacies of a second marriage,
it becomes vital.
"For every
one issue in the formal traditional family, there are 10-15 issues in the
blended family," says
Doug
Lamb, a certified financial planner in Toronto. Without
sitting down and working through the issues, things like who owns the family
home and who gets what in the will can become a minefield of problems.
"It's
charged with emotion; it's charged with the potential death of a parent; it's
the potential loss of an inheritance - which many people count on or think they
deserve or are at least upset if they don't get," says Lamb, who runs
Spera
Financial Inc.
Perhaps the
first thing to realize is there's no single right answer to this. What may work
perfectly in one family could be completely inappropriate for the next couple.
But every
solution requires communication and thinking ahead to what you want to achieve
in the years and decades to come.
Financial
planning is a key step whenever people fuse their lives together, whether in
marriage or a less formalized relationship.
The difference
is that first marriages tend to start out with limited financial assets, so
piling resources together to pay bills or save for a house or other goals often
makes sense.
In subsequent
marriages, especially when there are children from previous relationships, a
case can be made to keep certain affairs separate.
But separate
doesn't mean secret. All the cards need to be put on the table.
Let your partner
know if you plan on retiring by age 60, or want to buy a new car every five
years or take vacations each winter.
Financial
obligations from previous marriages like alimony or child support also need to
be factored in. If you see yourself putting all your children through
university, that's fine, but it will be a financial burden that the new couple
will have to share.
"I don't
get too hung up with whose money it is, what account it's coming from or who's
technically paying for it," says Lamb. But if you're
not working in tandem, financial planning can be far more of a juggling game.
Other things
that need to be tackled together include updating or redefining
insurance
needs, as well as what to do with extra real estate if the new union brings
together two homes.
All of this
might be a jolt to people who are used to handling all their financial affairs
themselves, says
Marc
Lamontagne, a certified financial planner with
Ryan
Lamontagne Inc.
in Ottawa.
But financial
stress on the relationship can be mitigated by coming up with a plan to handle
the daily costs of living. Who will pay what bills? Does each person keep
separate bank accounts or is there a joint account to pay some or all of the
bills? And how much money needs to go into the joint account each month?
There are also
various
tax
saving opportunities for people getting remarried. The partner with the higher
income might want to handle most of the house expenses, while the lower-earning
spouse holds most of the couple's non-RRSP
investments so that they're taxed at the lower rate.
Finally, the
most contentious issue can be rewriting wills after getting remarried.
Lamontagne
suggests bringing the extended family together and explaining your choices,
instead of leaving things unsaid and unsettled. Make sure matters are clear and
you've thought about the big picture - especially with blended families where
your spouse and children from both sides are entitled to consideration.
If you're
leaving the house to one set of kids, you'll need to make sure your spouse and
other children are also cared for and have somewhere to live.
"The
biggest thing I find with families is there's no communication," says
Lamontagne.
"In my
family growing up, it was rude to talk about money issues at the dinner table.
People need to get over those hurdles and talk about what's going to
happen."
1.
http://www.ryanlamontagne.com/images/stories/pdf_in_news/Second%20marriage%20B.pdf
