Gabriel Lalonde
May 19, 2021

Re-Married With Children? 5 Tips for Estate Planning

Merging household finances — especially when there are children from prior relationships involved — can be tricky. It requires thoughtful planning about how to handle inheritances for both biological and stepchildren.

Here are five tips to help you avoid common mistakes with your estate plan now that you’ve found new love.

1. Have the conversation

This can be uncomfortable. When money, ex-spouses, and children’s needs come together, tensions can run high.

Start by talking at a high level. Then, dig into details.

Make sure you both understand if either (or both) of you has financial obligations to an ex-spouse or children from a previous marriage.

Discuss your desires for taking care of your biological kids and stepchildren.

As with other high-stakes financial conversations, consider starting the discussion in private — but bring in a financial planner to facilitate, clarify, and provide technical guidance as the conversation evolves. You may also find that having a professional advisor in the room helps keep the discussion productive and constructive.

2. Dust off those documents

One commonly overlooked aspect of blending new families is updating beneficiary designations.

Does your RRSP or TFSA beneficiary designation list your previous spouse? How about your life insurance policy?

Many people don’t realize that beneficiary designations are legally binding documents that override your will. Whoever is the named beneficiary on your retirement accounts and life insurance will get the money.

So, make sure you list the person you want to inherit these accounts after your death.

3. Reconsider your simple will

Most of the time, leaving the bulk of your estate to your spouse makes sense.

But for blended families with previous children on one or both sides, this may no longer work.

Even if your new family blends seamlessly, it’s natural to want your biological children to receive at least a partial inheritance. If you don’t plan properly, your biological kids may have to wait until both you AND your new spouse die to get that money.

So, think about what you really want for your biological children. Then, make sure your estate plan aligns with that.

4. Know your province’s community property laws

Community property means that your assets are also your spouse’s assets. It can also overlook individual earnings and assume that each spouse contributed equally to the marriage … and, therefore, assets could be divided equally in death or divorce.

Applying provincial laws to pre- and post-marriage property can get tricky, especially for blended families. Be sure that you work with a lawyer to understand how the laws might affect your estate plan.

5. Consider a Trust

A Trust can allow you to set aside assets for specific beneficiaries. For many blended families, establishing a trust could be a viable solution to take care of each beneficiary on an individual basis.

Trusts can allow for the best of both worlds: ensuring your surviving spouse’s financial comfort, while also allowing your children to receive a portion of your estate. If you are interested in exploring Trusts, you should work with an experienced lawyer.

Estate planning can be challenging enough for singles and couples in their first marriages. Planning for blended families is even more complex. If you’d like to talk about your options, give the team at MDL Financial Group a call.

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