Liam Gibson
Wealth of Geeks
Wealth of Geeks
The so-called Great Wealth Transfer is underway as baby boomers enter their twilight years. Yet inheritance, like many aspects of modern life, gets complicated. What happens, for instance, when your surviving spouse is not the parent to your children?
Recent times have seen an unprecedented reconfiguration of the classic nuclear family unit, with “blended families” increasing in number. The US Census Bureau reports that more than 20% of opposite-sex American couples now live with a partner who has a child from a prior relationship. These new arrangements have, in some countries, led to a sharp rise in probate court litigation as multiple claimants battle for contested estates in the courts.
Meanwhile, equitable division cannot be assumed when it comes to wills. A 2023 academic paper using data from the Health and Retirement Study shows more than one-third of parents with wills plan to divide their estates unequally among their children.
The stakes are rarely higher than when money and death coincide, and for parents and children of blended families, navigating the complexities of inheritance can feel like crossing an emotional minefield.
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Mutual feelings?
Families are complex, and so are their finances. There are no silver bullets for blended family financial planning, yet for many remarried couples, mutual will agreements (MWAs) may provide the best framework.
These wills are mutually binding between spouses; after one spouse dies, the surviving party is bound by the will’s terms, which detail asset distribution to the next generation. Mutual wills guard against the risk of a surviving spouse disinheriting their stepchildren or electing to pass on the assets to their biological children from an earlier partnership.
“I haven’t specifically recommended mutual will agreements for clients, but that is always an option as we work with their attorney to find the best solution,” says Brian K. Peterson, founder of Endurance Financial Group. “In the case of MWAs specifically, its greatest advantage is that it cannot be changed once one of the partners dies.”
As Peterson points out, ironclad commitments can restrict a surviving spouse’s options, particularly if they outlive their partner through working and retirement years. This requires aligning expectations about what life will look like after one or both partners pass away.
“Clients should take this possibility into account and decide not only what they want for their kids, but also for their spouse,” adds Peterson.
Clear communication about finances is considered a cornerstone of a healthy long-term relationship. Yet a staggering number keep quiet about dollars and cents. An Empower survey last year found that around 46% of American adults do not talk about money with their partners.
There is a dire need for effective communication to help reconcile differences between partners. A survey by Bread Financial finds a majority of American couples (64%) admit to being “financially incompatible” with each other.
Festering irreconcilable differences can ruin a couple’s estate plan.
“Ultimately, how a couple makes money decisions now will influence how they choose to pass their wealth on in death,” says Peterson. “But taking it even a step further, creating a unified vision helps the couple talk about money going forward. A couple who is comfortable talking about money with one another can become more comfortable talking about money with their children and stepchildren. And couples should definitely talk to their children about their estate plans, appropriately aged children anyway.”
—————
Seeking clarity
Not all parents are forthcoming about financial plans. For children left clueless about their parent’s plans, the silence can be suffocating, more so if they have stepparents who seem posed to disinherit them.
Parents should take the initiative to communicate their intentions. But if the subject is left undiscussed for too long, it may be up to adult children to broach it.
President and CEO of Story Makers Investment Advisors, John Henry encourages adult children to approach conversations with their parents from a place of understanding, focusing on planning and open communication. Henry adds that family mediation may be the best form in some circumstances.
“While email communication may be efficient, a family meeting with a professional mediator allows for open dialogue, clarification of intentions, and reduces the risk of misunderstandings. Leaving wishes undisclosed can breed resentment and legal disputes.”
Parents interested in finding a professional mediator might consider hiring a local financial advisor with experience serving blended families. For more complex circumstances, seek a professional who has earned their Accredited Estate Planner (AEP) designation.
—————
A fresh start
Discussing inheritance can be complex, nuanced, and sensitive, especially in blended families. Yet, by seeking professional counsel and using tools like mutual will agreements, remarried couples with blended families can forge a lasting legacy that fairly compensates all their relevant relatives and builds financial security for future generations.
Recent times have seen an unprecedented reconfiguration of the classic nuclear family unit, with “blended families” increasing in number. The US Census Bureau reports that more than 20% of opposite-sex American couples now live with a partner who has a child from a prior relationship. These new arrangements have, in some countries, led to a sharp rise in probate court litigation as multiple claimants battle for contested estates in the courts.
Meanwhile, equitable division cannot be assumed when it comes to wills. A 2023 academic paper using data from the Health and Retirement Study shows more than one-third of parents with wills plan to divide their estates unequally among their children.
The stakes are rarely higher than when money and death coincide, and for parents and children of blended families, navigating the complexities of inheritance can feel like crossing an emotional minefield.
—————
Mutual feelings?
Families are complex, and so are their finances. There are no silver bullets for blended family financial planning, yet for many remarried couples, mutual will agreements (MWAs) may provide the best framework.
These wills are mutually binding between spouses; after one spouse dies, the surviving party is bound by the will’s terms, which detail asset distribution to the next generation. Mutual wills guard against the risk of a surviving spouse disinheriting their stepchildren or electing to pass on the assets to their biological children from an earlier partnership.
“I haven’t specifically recommended mutual will agreements for clients, but that is always an option as we work with their attorney to find the best solution,” says Brian K. Peterson, founder of Endurance Financial Group. “In the case of MWAs specifically, its greatest advantage is that it cannot be changed once one of the partners dies.”
As Peterson points out, ironclad commitments can restrict a surviving spouse’s options, particularly if they outlive their partner through working and retirement years. This requires aligning expectations about what life will look like after one or both partners pass away.
“Clients should take this possibility into account and decide not only what they want for their kids, but also for their spouse,” adds Peterson.
Clear communication about finances is considered a cornerstone of a healthy long-term relationship. Yet a staggering number keep quiet about dollars and cents. An Empower survey last year found that around 46% of American adults do not talk about money with their partners.
There is a dire need for effective communication to help reconcile differences between partners. A survey by Bread Financial finds a majority of American couples (64%) admit to being “financially incompatible” with each other.
Festering irreconcilable differences can ruin a couple’s estate plan.
“Ultimately, how a couple makes money decisions now will influence how they choose to pass their wealth on in death,” says Peterson. “But taking it even a step further, creating a unified vision helps the couple talk about money going forward. A couple who is comfortable talking about money with one another can become more comfortable talking about money with their children and stepchildren. And couples should definitely talk to their children about their estate plans, appropriately aged children anyway.”
—————
Seeking clarity
Not all parents are forthcoming about financial plans. For children left clueless about their parent’s plans, the silence can be suffocating, more so if they have stepparents who seem posed to disinherit them.
Parents should take the initiative to communicate their intentions. But if the subject is left undiscussed for too long, it may be up to adult children to broach it.
President and CEO of Story Makers Investment Advisors, John Henry encourages adult children to approach conversations with their parents from a place of understanding, focusing on planning and open communication. Henry adds that family mediation may be the best form in some circumstances.
“While email communication may be efficient, a family meeting with a professional mediator allows for open dialogue, clarification of intentions, and reduces the risk of misunderstandings. Leaving wishes undisclosed can breed resentment and legal disputes.”
Parents interested in finding a professional mediator might consider hiring a local financial advisor with experience serving blended families. For more complex circumstances, seek a professional who has earned their Accredited Estate Planner (AEP) designation.
—————
A fresh start
Discussing inheritance can be complex, nuanced, and sensitive, especially in blended families. Yet, by seeking professional counsel and using tools like mutual will agreements, remarried couples with blended families can forge a lasting legacy that fairly compensates all their relevant relatives and builds financial security for future generations.
