Financially Speaking

If you’re among the growing number of families where one or more spouses or common-law partners have children from a previous relationship, you already know that your new life brings with it many changes. This includes changes in your relationships with your new partner and children, changes in your day-to-day activities, and changes in the way you handle your new financial life together.

Money is always one of the most challenging aspects of relationships and that is especially true for blended families – so here are some financial planning basics to help ensure a smooth financial ‘blend’.

First things first

• Consider whether or not a domestic contract would be appropriate to protect assets brought into the new union.
• Get together and develop a new financial plan and budget that ‘fits’ your new family.
• Make the most of tax planning opportunities by splitting income, using spousal Registered Retirement Savings Plans (RRSPs), maximizing tax credits by claiming charitable donations and/or medical expenses in the name of one spouse/partner and transferring unused tax credits to the other spouse/partner.
• Redo your wills. Careful planning is needed to ensure that all the children in your new union will benefit from your estate in the way you wish. Traditional planning techniques such as joint ownership or direct beneficiary designations may not work because they could result in children from a previous relationship receiving nothing if everything is transferred directly to your new spouse upon your death.
• Rethink your insurance. You may need to update your beneficiary designations (in many cases to indicate “estate” as opposed to a direct beneficiary) or increase your insurance, especially if you are supporting an ex-spouse and/or children from a previous relationship.

Your kids and money

• Even though you and your partner might have come into the new relationship with very different ideas about how to deal with your children and money on a day-to-day basis – for example, one of you believes in strict allowances, the other in handing out money when a child asks for it – you need to agree on a cohesive method that treats all children equitably and creates a sense of order.
• As well, one partner may have been very diligent about using Registered Education Savings Plans (RESPs) to save for the children’s education and the other … not so much. If the RESP levels are quite different, how will you bridge them to avoid disagreements and resentment down the road?

Financial planning for a blended family can be complicated. Your professional planner can help develop appropriate strategies that ensure your new family’s financial goals are met in a truly ‘blended’ way that avoids heartache and litigation.