marriage

 

Marriage can be stressful enough. Add to that the complication of supporting children from a previous marriage, and you greatly raise the odds of relationship friction.

It’s important to have a full and honest discussion with your spouse about your need and duty to take care of your children from your previous marriage. Getting your affairs in order is critical not only to the success of your current marriage, but to the relationship you have with your children and that your children have with each other in the years ahead.  

Follow the steps below to start those discussions and ensure that you are meeting the needs of both your spouse and your children.  

  • If your former spouse is financially independent, communicate with him or her about establishing joint funding of certain items (college savings plans, healthcare, etc.)  If your ex-spouse is not affluent, consider term life insurance for you and your former spouse to guarantee the funding of such items.
  • Create a detailed budget for yourself, your current spouse, and your children from both marriages. Factor in your support obligations to your former spouse. Is your current spouse’s economic house in order? Does he or she feel that your support does not endanger his or her financial well-being? It may be time to obtain additional income-replacement term life insurance.
  • If you can afford to do so, set aside cash in separate accounts to support each child. The investment policy of each account should be related to the goals for each child rather than to your personal tolerance for risk.
  • Review your beneficiary designations for life insurance and retirement plans to make sure they are in line with your estate and financial plan. This is where consolidating your overall investments with one institution is helpful; as that institution can annually audit such designations to make sure they remain in line with your overall plan.
  • Are your financial and medical powers of attorney in order? Are the right agents named, and are they willing and qualified to serve?
  • Most first-time married couples take title to their primary residence as joint tenants (if one passes away, the other inherits the home outright). Many couples from second marriages have different wishes when it comes to who inherits their assets, even when there are joint children involved. Examine the titles you have on all your assets—especially your primary residence—to make sure they are in line with your overall plan.
  • If your current spouse is significantly younger than you, it is possible your children could not receive an inheritance, as these assets become locked up for your surviving spouse’s support for the remainder of his or her life. Permanent life insurance as an inheritance alternative may be wise.
  • Do you and your current spouse have a combined estate that will be subject to estate taxes? Talk to your financial advisor about the benefit of placing your existing permanent life insurance in an irrevocable trust.
  • Include planning for long-term disability and long-term care, and acquire policies to cover this..
  • If you leave assets to children in trust, avoid naming one child to act as trustee over the others, and avoid naming your current spouse as trustee for children from your prior marriage. Instead, consider naming a bank trust company to serve as sole trustee or co-trustee.
  • Be open to learning about various estate planning strategies (e.g., a QTIP trust) that will take care of a less well-to-do spouse but leave your assets to your children after your surviving spouse has passed away.

Most people put off doing any form of estate planning. While that is bad enough with a first marriage, it can lead to disastrous results for second marriages with children. Contact your financial advisor and start building a tailored estate and financial plan that will ensure that all of your children—as well as your cur rent spouse—are well cared for, and you’ll leave a legacy of harmony, not family conflict.

City National Bank, as a matter of policy, does not give tax, accounting, regulatory or legal advice. The effectiveness of the strategies presented in this document will depend on the unique characteristics of your situation and on a number of complex factors. Rules in the areas of law, tax, and accounting are subject to change and open to varying interpretations. The strategies presented in this document were not intended to be used, and cannot be used for the purpose of avoiding any tax penalties that may be imposed. The strategies were not written to support the promotion or marketing to another person of any transaction or matter addressed. Before implementation, you should consult with your other advisors on the tax, accounting and legal implications of the proposed strategies based on your particular circumstances.