3 Estate Challenges for Blended Families

ESTIMATED 2MIN READ

Preparing your estate can be complicated, and if you’re a part of a blended family, estate decisions can be even more complex and nuanced. Blended families take on many forms, but typically consist of couples with children from previous relationships. Here are a few case studies to help illustrate some of the challenges.

Case Study #1: Children From Previous Marriages

Simple wills often are structured to leave all assets to the surviving spouse. If your estate strategy relies on this type of will, you could risk overlooking children from previous marriages. Also, while it’s unsettling to consider, the surviving spouse can end up changing a will without proper measures put in place.1

When new children join a blended family, estate strategies can get even more complicated. But with a well-structured approach, you can direct how to distribute your assets.

Case Study #2: When One Partner Has Significantly More Assets

While the divorce rate has been trending lower, the number of remarriages (2nd or more marriages) has increased. One person entering into a new marriage may have more assets than their spouse, given that 40% of all new marriages are remarriages for one or both spouses. An estate strategy can help ensure that your assets pass down according to your wishes.2

Case Study #3: Traditional Trusts May Not Be Enough

In blended families, a traditional trust is a good start, but it may not go far enough. One possible solution is to create three trusts (one for each spouse, in addition to a joint trust) to help address different scenarios.3

Using a trust involves a complex set of tax rules and regulations. Before moving forward with a trust, consider working with a professional familiar with the rules and regulations.

Starting the Process

Blended families are pretty common these days. If you’re in that position, it’s important to remember that you can create an estate strategy to address your specific situation. The first step may be an estate document review.

1. Investopedia.com, April 25, 2021
2. OnlineLibrary.Wiley.com, January 5, 2020
3. Investopedia.com, November 14, 2021

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2022 FMG Suite.

ESTIMATED 1MIN READ

My wife, Chelsea, and I are expecting our first child this November. I will not be the first person to be a new dad, nor will I be the last. While many humans find themselves in the position of raising a child at some point during their lifetime, that experience is unique to each individual or family unit.

We all experience and view things through a different lens so it is difficult to know what your specific experience will be like before it happens. You can ask countless people about their own experiences and ask for endless advice. Even after all of that, you can still find yourself feeling overwhelmed and unprepared when the time comes for your family’s first child to be born.

Does this mean that planning for the financial impact of having your first child is fruitless? No, it means exactly the opposite.

Chelsea and I have been doing our very best to plan for the unknown.

• The simplest step in preparing for the unknown has been to increase our emergency fund savings.
• Another simple step was to purchase specialized health insurance for Chelsea that is designed for pregnant women.
• The key here was purchasing the right health insurance before Chelsea got pregnant. While this took a bit of planning ahead and the health insurance premiums were hefty, having that insurance helps us have peace of mind in the face of the unknown.
• We have kept a watchful eye on household expenses, and we have projected an increase in those expenses once the baby arrives.

There is a lot more for us to think about once the baby is here with us. But for now, we are planning to be ready for anything.

MONEY DO’S AND DON’TS: Stop managing your money like it’s the 50’s!

ESTIMATED 2MIN READ

Paying Off Your Home
Many Americans still believe that paying off their home or sending extra mortgage payments each month is a good idea. At one time, it might have been, and in some instances today it might be, but when a person considers today’s world, “renting from the bank” might make more sense.

“But all of that interest!”
Paying off a home comes from what I think is 1950’s thinking. America had just come out of the Great Depression, then World War II trauma and rationing, so owning a home provided security. More importantly, in those days a person COULD AFFORD to pay off their home with a variety of reasons why they wanted to:

• The median home price in the 50’s was $7,354 (1) equivalent to about $79,000 in 2022
• Monthly housing cost was about 22% of the annual budget
• Homes were much smaller at less than 1,000 square feet, one bath, kids shared a bedroom
• People tended to stay in their home for a long time, sometimes the rest of their lives.

Compare that data to today and one can easily see why it might not make sense to pay off your *current home:

• Median home price in 2022 is roughly $400,000 (2)
• Monthly housing costs average 44-50% of the annual budget
• Average square footage in America today is about 2,300 square feet (3)
• In 2020 the average family lives in a home for about 13 years (4)

 
In my next write-up, “You Can’t Eat Your House” I’ll detail the actual numbers that show why many would be better served not paying off their home or sending extra payments.

1. https://dqydj.com/historical-home-prices/
2. https://www.fool.com/the-ascent/research/average-house-price-state/
3. https://www.census.gov/construction/chars/highlights.html
4. According to the 2018 1-year American Community Survey.

So You Think You Want to Retire?

ESTIMATED 2MIN READ

It was simple.  I didn’t want to retire.  I had not considered it.  That’s when I was mid-60s.  My Social Security retirement date was age 65, but I wasn’t ready.  Age 65 came and went, as did 66, 67, etc.  I was in good health and felt many years younger than I was.  Work was a pleasure!

However, I began to pay attention to friends and clients who retired at the “normal” age or before in some cases.  Some were happy and completely content.  They had things to do.  Others were not.  They missed the routine, the social side of work, the satisfaction they derived from work, but they didn’t want to go back to the grind, the obligation, the commitment to a daily routine because they enjoyed their new freedom.  Some found satisfaction in part-time work completely unrelated to their former work.  Some found volunteering, often for several different causes, was a good fit.  What was the difference?

I concluded that some occupations or employers basically force or “incentivize” workers out at a certain age, but people know that in advance and can make plans.  I observed that individuals in highly regimented or bureaucratic workplaces, like government, government contractors, school systems, etc. are the ones most ready to retire.  Sometimes they pursue something else that is completely unrelated in retirement.  

Generally, those who love what they do such as business owners, self employed persons, and those who have creative latitude and flexibility are often the last to retire.  How many doctors, lawyers and business owners do you know who choose to keep working after “normal retirement age”?

At 65 I found myself unwilling to give up my client interactions largely because my clients are friends.  Most client interactions wind up being both social and business, and I enjoyed both. 

In the next post we’ll look at my progression of thinking and the changes in my attitude.