Transcript:
Easan Arulanantham:
I’m getting married soon. This is my second marriage. And my partner and me both have previous our kids from previous marriage, should we be combining our finances? And what are some pitfalls to avoid?
Tom Vaughan:
Yeah, we run across this all the time. Lots of times lots of families, second marriages for variety of reasons, divorces, you know, widows and such like that. And so there’s it’s two separate families. I mean, what do you think? I mean, give me some of your ideas as to how you might handle that.
Easan Arulanantham:
Yeah, so it’s kind of like merging two businesses into one. And so each has their own asset pool, they have their own, you know, kind of traditions, their own ideas and finance. And you’re combining that it’s a new kind of like, new one. And so you have to be open, you want to be communicate with your partner, you don’t want to hide anything from them. And you gotta treat everyone kind of equal on equal terms. And so there’s kind of two things you want to think about is the now you know, your medical who’s paying for education, kind of lead that short term futures and that your lifetime? And then you also have the estate planning. So how are you going to make sure that, you know, everyone gets their fair share your estate and in the right way? And so, one thing to start thinking about if you’re pre marriage is, is it worthwhile to get a prenup? Are you want to, you know, do you want to have it, so my partner will get X amount of money while the rest goes to my children.
Also, any kind of life insurance or any kind of policies like driver’s insurance, or car insurance, house insurance, or umbrella insurance, is everyone that’s going to be in your household, on their benefactors, or under that insurance to protect them. Because a lot of times we forget about these things. And, you know, my child’s not on my health care anymore, but is my spouse’s health care, or my ex spouse’s health care, or where’s this gonna be how they’re gonna get paid for. And so you have to kind of combine that too. And I would start with a new financial plan, honestly, you’re starting over again, with this person, a new financial planning kind of brings out everything into the open, and then you, you also have to manage this same. So a new will, would be pretty important. So you know where everything goes.
And then one thing that happens is, a lot of times you want to take care of your spouse. But you also want all your assets not to go to your spouse, but to your children. And so how do I set that up. And so the way a lot of people do that is with a qualified terminable, interest, interest, Property Trust, so acute it. And so essentially, the idea is your spouse has access to the income and then for any certain expenses that they would need. So like medical, maybe education, or just general maintain your standard of living expenses, they could access the money, but then everything else, once they pass away, goes to your children. And so that’s a really cool way to have best of both worlds while still keeping control after you’re gone.
Tom Vaughan:
Yeah, I’ve been through this a lot, there’s some there’s a discuss a couple of soft areas, you know, that are always financial, because it’s different, you’re the only one that’s going to know where you’re at with this type of situation. So I see some families where it’s really important that it’s spelled out, if it’s not spelled out, it creates all this consternation, and you know, you’re getting remarried or what have you, and you want the whole group to be happy in the end. And so sometimes really getting organized and spelling it out, and making sure that everybody understands, while you’re still gonna get this money, you know, and you’re still gonna get this money, that type of thing. And so that there’s, you know, no bad feelings when you got family gatherings and different things along those lines. And so I’ve seen, you know, where each person will have, you know, their own investments, they’ll have their own savings account, and then they have one joint account, and they each put money into that joint account, in order to kind of pay the bills, and everything stays completely separated. I’ve seen other situations again, this is where you have to determine, you know, kind of where your family is where things get completely combined together over time, just because, you know, the family is much more of a single family at some point in time. And that’s more of a almost like an emotional thing more than a financial thing.
And so you want your financial situation to match what’s actually happening in that family and how that family is being structured together. And so, is that Q tips is that you know, you know, the, what’s the trust call, not the Q tip trust, oh, the prenup sorry, skip that word. You know, all these things that can be done. And those are all tools, but you do need to look at the family structure, which only you know, and how that’s going to work and how that’s going to play out. And you also need to assume that there could be some consternation with In the family if you don’t spell it out correctly. And so it is, it’s, it’s just like a business merger, you know, there’s the financial aspects of that business merger. And then there’s the more soft aspects, you know, what’s the cultural situation like with one company and another? How’s this group of employees, otherwise known as your kids gonna associate with this other group of employees otherwise known as their kids? And, you know, it’s a how do you make that come together as one family. And so I do think that the financial portion could be one of the foundations of that to kind of help that along. So it’s a really interesting area, we run across it quite frequently. I’ve seen it done a lot of different ways. And I would say that the difference between one way and another has to do with the difference of where that family is, as far as how cohesive they are as one unit or not, right? And that just, and that can change over time. And you want to evolve your financial thought process over time, as your family situation changes, right. And you know, how close they get together and those types of things? So it’s a good question.
Easan Arulanantham:
Would you say like, having open communication between the spouses is really important for kind of like doing this?
Tom Vaughan:
Oh, yeah, exactly. And that, I see that mostly, that seems to work pretty well. And I see most of them doing that. It really is that communication with the kids, and that that can be tough. Only because some people don’t like to have their kids involved in their finances. You know, some people do, everybody’s different there. And so, you know, just trying to figure out what’s going to work there. Because that’s usually where the real problems end up happening. One person passes away, and that person’s kids are arguing with the surviving spouse over the money. And, you know, the other kids are getting involved. And, you know, we’ve seen some of those situations too. And that’s just where it wasn’t communicated properly. It wasn’t spelled out properly. It wasn’t what you know, those kids wanted. It can be difficult, right? Because every single person has a different outlook on what they want. And so you’re gonna have two kids with two different ideas on how this should work. But nonetheless, you try really hard to get that and that that is communication is an aspect of that, that’s for sure.