"Remarried, With Children" Brings Special Financial Challenges

Two people deciding to spend the rest of their lives together must find ways to merge their life priorities, daily household routines, and individual personality quirks.

Two people entering a second marriage, bringing children along with them, face even bigger challenges. You're older, more set in your ways, and by now have firm notions about how to be a parent. Plus, in joining forces, you're combining an even larger, more diverse mix of personalities who somehow must learn to live together under one roof.

Then, there's the financial component of a family merger. The two spouses may have vastly different financial assets and circumstances, notes Susie Johnston, a certified financial planner® (CFP) in Littleton, Colo. "One may have elderly parents to take care of," she notes. "One may have little children, and the other has college-age children. If they have any children, they have to blend how the children view money."

Not only that, but the spouses may bring old financial baggage to the new relationship. She may be responsible for her ex-husband's huge credit card debts. Or quarrels about money may have contributed to the failure of his first marriage, and today he still gets defensive when the subject of money comes up.

Finding common ground

For all these reasons, talking about money before blending two families is critical, says Joslyn G. Ewart, a CFP in Wayne, Pa. "If people don't talk about money before they get remarried," she advises, "it's going to be a lot harder to talk about it after, when there will be that much more emotion attached to it."

Indeed, two people merging their families have a lot to discuss--both the here-and-now decisions and long-term planning. How will you divide household expenses? Will you have separate or joint accounts, or both? Will you each be responsible for your own children's expenses or will you pay for all of them jointly? Will you pay for their college educations separately or jointly? What contributions can you count on from your ex-spouses? What financial commitments have you made to your ex-spouses that you must honor in the years ahead? The list of financial issues goes on and on.

In your discussions, full disclosure is imperative. "One would hope if someone had diabetes, that he or she wouldn't be reluctant to tell a future partner about that," Ewart says. "It's not much different with financial concerns. Debt, for instance, affects both of you. The minute you're married, it's both of yours. That's often overlooked. People think if I establish my own credit card and my spouse's name isn't on it, there can't be dual liability. But ultimately there [may be]."

Remarriage also is a time to change the named beneficiaries on insurance policies, investment accounts, and so on. In addition, "See a good estate planning attorney," Johnston advises. "You want to make sure your kids [from your first marriage] are taken care of in the event of divorce or death."

For instance, say you own a farm that's been in your family for generations, and you want to leave it to your children when you die. Your new spouse, however, has a claim on that farm. If she also dies, your children and stepchildren all could stand to inherit the farm--unless you've made other legal arrangements.

This is just one example of how inheritances can become extremely sticky in blended families. That's why proper estate planning is important. For some couples, a prenuptial agreement may be a good idea, as well. Again, seek legal advice.

A family affair

In a blended family, not only must the spouses combine their financial lives, but they also need to get their children on the same team. Here again, frank discussion between spouses is the starting point. What lessons do you both want to impart to your children about managing money? "It's important to have that conversation before marriage," Ewart emphasizes.

For instance, the two of you may have different approaches to sharing money with your children. How much has each of you been paying in allowances? Do you regularly hand out cash when your children want to make special purchases, or do you expect them to earn that money themselves? What attitudes about saving and charitable giving have you tried to instill?

Of course, spouses can continue to follow separate policies on financial matters with their respective children. But that may thwart what you're trying to accomplish. "If you don't come together on this somehow," Johnston says, "you're not really going to blend your families."

Once you and your spouse have come to an agreement, involve your offspring in family discussions, too, if their age and maturity level enable them to participate. That way they won't feel they've been handed a parental edict. And if they're going to see less spending money coming their way than they've been used to, they'll better understand why.

"Have a meeting of the whole family," Johnston suggests, "and let your kids be part of the decision-making. You could even have a financial planner sit down and work with all of you. Then you'd have an intermediary who isn't on anybody's side."

A fresh start

Blending two families is often a major adjustment for everyone involved. Family members may have to make changes--sometimes major ones--in the way they spend and save money. They may think they're being hit with harsh new rules, or that they're being blamed for having "bad" money habits in the past. How do you avoid that kind of negativity?

"I like to use the phrase 'imprinting new habits,' " Ewart says. "It's not pejorative. It's not like, 'Oh, now we're getting disciplined.' It's just that we had those habits before, and here are the reasons why we're implementing these habits now."

After all, creating a blended family marks a new stage of your life. And in coming together as a family, you're launching a new financial life, too. "The point is," Ewart says, "this is a great fresh-start opportunity."

Published November 20, 2005