INVESTING with Spicers
The 'Modern' Family
how can it impact your financial affairs?
Larger, blended families are a common occurrence these days, whether it’s a result of a second marriage, moving in together
or the forming of new relationship after
the death of a spouse.
The modern family can be a blended bunch with numerous grandparents, step grandparents, step-siblings, half-siblings and so on and the impact this has on financial affairs, let alone family dynamics, can be mind-boggling.
According to Statistics New Zealand, roughly 10,000 divorces take place in New Zealand each year. Of those who married in 1980, one third of couples had already divorced by their 25 year wedding anniversary .1
If we’re anything like the Americans, those divorcees who go on to get married a second time, have only a 40% chance of succeeding!2 These subsequent marriages tend to fail quicker too, with 37 per cent dissolved after 10 years compared to 30 per cent of first marriages.
So what are some of the implications of marrying for the second time? Ongoing money problems - often a legacy from the first divorce – can be problematic, as can the added complications of living together and the inevitable conflicting schedules new families encounter.
Common sense, professional advice and planning can help to avoid some of the financial and legal trip-ups the second-time-round.
Structure it right, from the start.
- Create a joint account where you contribute a set amount each week or month to help cover household expenses. This can also be used to save money for the future, and that all-important ‘fun’ fund.
- But, and this is important, keep the balance of your money separate in your own bank account.
- Don’t make the mistake of moving in with someone without discussing who’s paying for what. An example is a case where one party paid for major renovations to the home, substantially increasing the value of the home. Unfortunately, the couple split a few years later and the other party benefited from the increased value which he paid for.
- Recognise you are a new household now; establish some spending boundaries and future goals. You might want to save for your daughter’s wedding, or fancy a fortnight in Fiji. The important thing is to discuss it, decide your priorities together and commit to this, and remember, the values and financial goals each partner has are likely to have been honed long before meeting each other.
- Respect each other’s plans and aspirations. One party’s might include being able to assist their kids or grand-kids with university fees, whereas another party’s might be to install a new kitchen. Much of this is about compromise.
- Perhaps (depending on your age) consider your own children. It is estimated that in almost half of stepfamilies, each parent brings one or more kids to the mix. Hopefully this means one great big happy family, but children cost money. The latest cost estimate put on raising a child until they’re 18 for the average parents in New Zealand is around $250,000.3, even after they’ve turned 18, it doesn’t stop there. It’s likely they’ll need help with funding for further education, as well as their first car, and even a deposit on their first home.
Protect what’s yours.
Creating a trust account for savings and investments is an excellent way to provide separately for children from a previous marriage. These can be professionally managed and designed to create specific plans for how and when assets are divided. Remember, if you have joint assets, you could be liable for joint debt as well, so it does pay to protect your assets in a trust.
Other steps that can help create financial certainty in a blended family, is to ensure wills and beneficiaries are updated. It has been known for non-probate property – such as homes and even bank accounts – to go to an ex-spouse.
A prenuptial agreement isn’t just for Hollywood couples. This spells out what each person owns and can expect if they end up single again, but it also lets one spouse waive rights to any property – such as a family business or an investment account – that the other wants to preserve for his/her children.
A blended family does raise some additional financial planning issues, but there are ways to smooth them out, even in the most complicated family circumstances.
If you have any questions about your financial situation or investing,
I may be able to assist. You can reach me on: 486 7892
or email: firstname.lastname@example.org