Yours, Mine, And Ours

Blended financial planning for couples with stepchildren

accountant or attorney or financial planner, who insists that you have a prenup agreement in place before taking new vows. “Blame anyone you want,” says Makin, “but just make sure you get it done.”

Whether or not you have a prenup, the ownership of the assets each spouse brings into a remarriage should be considered. “You need to decide if these ‘sole and separate assets’ will be kept separate or co-mingled,” says Creuzot. “If they’re kept separate, the original owners may be able to claim their individual assets in the case of a subsequent divorce, or direct how they’ll be transferred, as part of an estate plan.”

Although Smith did not enter into a prenup when he and Greta married, they kept their assets separate for six of the 11 years they’ve been married. “After a while,” he says, “my apprehensions subsided and we decided to co-mingle our assets.”

Remarried couples need to be careful how property is titled, Makin cautions. “Holding assets in joint name with your spouse may make your home life easier, but it will cost you flexibility,” he says. “All property held JTROS (joint tenants with rights of survivorship) automatically will go to your spouse if you’re the first to die.”

If you transfer your brokerage account into joint name, for example, all of those securities will pass to your spouse and not to your children.

“The drawback to JTROS,” says Creuzot, “is that the surviving owner inherits the property no matter what you put into your will. If you have so
me other intention, joint ownership may not be the best choice. The bottom line is that you need to coordinate your entire plan–your will, your property ownership, your life insurance, your trusts–to get the results you want.”

Among the most important assets to be considered, of course, is the place where you’ll live. Will you move into a home that one or the other of you already owns or into a different one? “Often,” says Smith, “moving into a home already owned by one spouse or the other doesn’t work. The husband might feel that he’s moving into his wife’s home, for example, where he’s just a visitor. I usually recommend that couples sell the house or houses they own and buy one that’s really their house, to suit the needs of the new family.”

If one or even two homes will be sold by a remarrying couple, it may be better to wait until after the marriage to make the sale. That’s because a married home owner who has lived in his or her house for two or more years with a joint tenant agreement can claim a $500,000 capital gain exclusion ($250,000 per person) on the sale of a principal residence while a single home owner can exclude only $250,000 worth of gain. Thus, couples with a highly appreciated home can receive a sizable wedding gift from the IRS.

What else needs to be done by blended families? “You should update your beneficiary designations,” says Smith. “If

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