Yours, Mine, And Ours

Blended financial planning for couples with stepchildren

estate plan, he said all of the assets should be divided equally among all the children on both sides, but she just sat there quietly.”

No agreement was reached, so Smith came up with a plan. “I suggested they buy a ‘second-to-die’ life insurance policy,” he says, “one that would pay off after both of their deaths, and have the owner create an irrevocable life insurance trust to avoid estate taxes. His children would be the beneficiaries and collect the proceeds tax-free, while her children would get her assets, which are mainly in an IRA and in real estate.”

So far, says Smith, the plan has not been completely approved, chiefly because of the husband’s reluctance. “He can see the money in the retirement plan statements, but the idea of collecting insurance proceeds seems insubstantial to him.” In the meantime, as the couple ages they are becoming more expensive to insure and more likely to die without any plan at all, an outcome that may lead to years of family strife and expensive legal fees. At the end of the game, as well as in the beginning, careful compromises may be needed to keep a blended family together.

To Do List

  • Get premarital counseling to deal with personal and financial issues.
  • Determine how the two of you will fund education for all of the children well in advance.
  • Discuss budgeting issues before marriage.
  • Get a prenuptial or postnuptial agreement stipulat- ing how the children from your first relationship will be cared for financially.
  • Determine a strategy of how property will be divided upon divorce or you and your spouse’s deaths– include provisions for children.
  • Move into a home that the two of you “jointly” own.
  • Update your beneficiary designations to include your children.
  • Each of you should develop your own will.
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