Getting married is an exciting milestone for couples and their families. For couples with children from previous relationships, the excitement—and the financial considerations—may be heightened.
Alongside nailing down the guest list and selecting flower arrangements, financial planning conversations should be at the top of any premarital to-do list, and especially for blended families, as they have additional financial matters to consider.
According to the Stepfamily Foundation and the U.S. Census Bureau, 1,300 new blended families are created every day. Second and third marriages often come with more involved parties than first marriages. Children, ex-spouses, co-parents, and extended family members all impact how couples will approach finances together.
Additionally, couples who marry later in life may have built up substantial wealth and have more assets to consider than they would have earlier in life. Couples closer to retirement age may need to take a different approach to protecting their portfolios than couples who may just be starting out investing and working to grow their nest egg.
First and foremost: Communicate
When I work with soon-to-be married couples on their finances, the most important thing I stress is communication, regardless of age or assets. Rather than dimming couples’ pre-wedding glow, these conversations offer opportunities to reinforce your commitment, align on shared future goals, and create strategies to reach your goals together. Financial topics might not make for the most romantic discussions, but scheduling time to talk about finances, to understand each other’s perspectives, and address questions and concerns undoubtedly lessens financial conflicts after the wedding day.
Read: Should you buy an annuity for your retirement?
Start with simple, short-term financial planning like day-to-day cash flow, budgeting, where and how you will combine finances, and how each partner will contribute to regular expenses. Couples may have disparities in income and different levels of assets and debt that should be examined and addressed. For couples marrying later in life, existing mortgages may be more prevalent. Therefore, deciding where you will live and how you will think about these individual assets and debts collectively, ahead of marriage, can help avoid tension down the line.
Once couples are in a good place with short-term goals, they should start to discuss the long term. Discussion topics should include when and where the couple plans to retire, how they’d like to spend their time in retirement, and how these goals will be funded. The earlier the couple can get on the same page, the better chances they have for overall financial success.
Making sure each partner’s goals and wishes are clearly communicated should also extend to children and other involved family members.
In addition to aligning on short- and long-term financial goals, partners who will be blending families may want to consider these three steps before heading down the aisle:
Consider a prenuptial agreement
A prenuptial agreement, or a “prenup,” should be considered for any couple, especially for those with significant assets, or when a partner has been married previously, or has children.
Prenups can protect assets and help couples tie the knot with peace of mind. Rather than thinking of prenups as unromantic, consider a prenup as a sign of mutual respect and understanding that demonstrates that you will honor each other’s best interests—for better or worse and richer or poorer.
Update life insurance and IRA beneficiaries
Think about who would need support if you were to pass away before your spouse. Do you need to have enough to cover both the surviving spouse and your children/dependents? You may need to update who will be receiving these funds.
Create or update estate plans
If both you and your fiancé have children, consider how your individual and joint assets will be distributed among all of your children and consult a financial adviser or estate planner to understand how to achieve these legacy planning goals based on the laws in your state.
Before getting married, you may have been planning to pass along your home to your children. If you die before your spouse, however, will they remain in the home? Will they have enough to cover household expenses and any remaining mortgage payments? It is important to discuss these matters as part of planning for your financial future together.
Trusts can be a good way to outline your plan to your beneficiaries. I once worked with a woman who had significantly more assets than her partner. We had to be very thoughtful about creating a trust for her children and grandchildren, while also ensuring that her partner was able to remain in their home and have enough money to cover expenses. While blending families sometimes means additional financial complexity, detailed planning can set couples up for success.
When it comes to managing your finances as a blended family, communication and preparation go a long way in helping the couple—and both individuals—feel comfortable and confident in their financial future.
Julie Virta is a senior financial adviser at Vanguard.
