Blended families are moving closer to the mainstream, and might include you.
The 2011 census counted step-families (Statistics Canada’s term for blended families) for the first time and found that they represent about one in eight families with children. However, there is also an untold number of Canadians who are part of a blended family who do not live in the same household because all of the children are adults and have moved on. Taken together, the reported number of blended families and the unreported number represents a large demographic.
Money matters are challenging in any relationship, and hold special importance in a second (or third) marriage or common-law relationship, especially when they include children from previous and current relationships. Estate planning is equally challenging in these situations. Consider these blended financial and estate planning points:
If you and your partner have separate financial plans, make it a priority to come together and develop a cohesive plan that will help best attain your new family’s objectives.
Determine how you are going to treat all your children equally.
Establish an RESP for every child that does not already have one.
Customize your estate plan to reflect your personal situation to ensure your estate will be divided equitably to children from both previous and current relationships.
One of the main mistakes couples in blended families make is to designate each other as the direct beneficiary their assets, or to hold all assets in joint ownership. Upon the death of the first spouse, everything goes to the survivor, potentially disinheriting one branch of the family. That is why a standard will is often not recommended for blended families.
Other strategies include dividing the estate at the time of death of the first parent or using a spousal trust to protect the assets for both families. It’s crucial to speak to your legal advisor regarding a will with terms appropriate for your blended family.
Many couples choose to hold property jointly, so title passes automatically to the survivor on the death of the spouse and avoids probate fees. But if you have children, or other dependants from a previous relationship, and want them to share in the value of your property, then holding title to the property jointly with the right of survivorship is often not appropriate.
Andy Erickson is the division director with Investors Group, Vernon. This article is provided for information purposes only. Please consult with a professional advisor before implementing a strategy.