Marriage after divorce can bring together more than just two people. There may be children from previous marriages, separate assets, different incomes, as well as different expectations about what each spouse wants to leave behind.

Combining everything isn’t necessarily the solution. Most blended families will benefit from being much more deliberate about which financial goals are shared and which ones stay separate.

 

Household Rules

Start by deciding how the new household is going to operate financially.

It may not be the same as your previous marriage. Income and expenses may not be combined the way they were in your previous relationship, but it’s important to figure this piece out. Figure out who is responsible for expenses related to children from previous marriages— college costs, weddings, homes, financial assistance all need to be assigned.

A practical approach is a “yours, mine, and ours” structure.

Each spouse maintains some individual assets while contributing to an agreed amount to a joint account for household expenses and shared goals. Contributions don’t need to be 50/50; it’s quite possible different incomes will carry different responsibilities.

If college savings are a priority, determine who will fund 529/UTMA accounts and how much will be contributed. If either spouse plans on providing meaningful financial support to adult children, build that into the financial plan rather than treating it as an unexpected expense.

 

Rebuild the Estate Plan

Estate planning could have its own article for blended families. Here are the key components to consider:

Leaving everything to your spouse can create an unintended result. Once assets pass to your spouse, your spouse now controls where those assets eventually go. If you want to provide for both your spouse and ensure that assets ultimately reach your children, the estate plan needs to address this specifically.

Several tools can help.

A trust can provide income or access to assets for a surviving spouse during their lifetime while directing the remaining assets to the children afterwards. It all depends on your specific circumstances, but a Qualified Terminable Interest Property (QTIP) trust can provide a surviving spouse with lifetime income while allowing the original owner (grantor) control who inherits the remaining assets after that spouse dies.

Life insurance can also create a separate pool of money in the estate. For example, retirement assets could pass to the spouse while life insurance proceeds go directly to the children. There are specific benefits to a surviving spouse receiving retirement benefits that children don’t have— the Eligible Designated Beneficiary (EDB) category, which means they qualify for exceptions to the 10-year rule under the SECURE Act. Minor children also qualify for this role, so keep that in mind.

Beneficiary designations should also be reviewed. After divorce and remarriage, outdated designations could revert to the previous spouse, or the new relationship could be ignored entirely. An annual beneficiary review is important regardless of your situation, but it is particularly pertinent in remarriage.

 

Coordinate Retirement

Build your new retirement plan around both spouses’ timelines rather than choosing one specific retirement date. Determine how expenses will be covered if one spouse retires and the other keeps working. Age gaps are more prominent in second marriages, and this disproportionately impacts those types of relationships.

Social Security should also be coordinated.

Claiming decisions can impact spousal and survivor benefits, so the highest individual benefit isn’t always the only consideration. Model all income sources, not just Social Security.

 

Put It All Together

A financial plan for a blended family should ultimately answer a few fundamental questions: What do we own together? What remains separate? What are we providing for our children? What happens if someone dies?

Answer these questions and put the appropriate tools behind those answers.

Coordinating with an advisor is a great way to ensure you know all the tools at your disposal. Not every financial plan is the same, so make sure yours reflects your unique situation.

Blended families introduce additional complexity, but complexity itself isn’t the problem. The bigger risk is allowing default financial arrangements to make important decisions for you.