Families are formed in a variety of ways – some “traditional” and others in unique fashion. Point is there is the concept of blended families and it’s one that advisors need to be aware of because it’s increasing in prominence.
The simple definition of a blended family is one where the two spouses enter into marriage with children from a prior marriage or relationship. This scenario isn’t limited to heterosexual couples and can occur via divorce, death of a spouse or other factors. Indeed, there are moving parts in blended families. That’s not bad. Not at all, but it means advisors need to be aware of some issues. Children are a prime example.
“In many cases, the non-biological parent will adopt the other's children, but not always. To formalize an adoption, both biological parents, except in the case of a death, will need to approve the adoption,” according to Love to Know. “Formalizing an adoption gives the new stepparent legal authority with the children, including the ability to authorize emergency medical care and the responsibility to help provide care if the parents' relationship ends.”
Bottom line: there are complexities associated with financial planning families, indicating that these families can benefit from working with advisors.
Blended Families Overlooked Opportunity
“Blended families” isn’t just a social buzz phrase. It’s applicable to a broad swath of American families, signaling advisors would do well to enhance their relationships with these families. For those that need more convincing, by some estimates, four in 10 American families can be considered blended.
With family dynamics evolving, it’s likely that advisors will encounter more blended families and they need to be prepared to best serve those clients and their unique needs. An important place to start is, not surprisingly, estate planning.
“A will designed specifically for a blended family—often referred to as a blended family will—is a crucial tool for ensuring that all parties’ needs and wishes are met. It ensures that assets are distributed according to the deceased’s wishes rather than default inheritance laws, which may not always be fair or in line with the individual’s desires,” notes Nationwide. “For instance, your client may wish to leave their home to their children, but also ensure that their current spouse can live there for the rest of their life too. In such cases, a life estate could be set up, allowing the spouse to live in the home until they pass away, at which point it would transfer to the children.”
Then there’s the matter of insurance – both health and life. Advisors should work with blended families to ensure that all members of the family have adequate healthcare and that there are no gaps in coverage. Regarding life insurance, reassessing beneficiaries and coverage to reflect the addition of new family members is a benign, but important task.
Other Issues to Consider
Estate planning and insurance are merely starting points for working with blended families. Advisors should work with blended families on key areas, including debt management, long-term care solutions, retirement planning and tax situations.
Point is, blended families need advisors and that will remain the case over the long-term.
“Circumstances will vary so what works for one family may not work for another,” concludes Nationwide. “It’s important to stress to your clients that professional legal advice should be sought in all matters relating to wills and estate planning. In conclusion, guiding your clients through financial planning when they have a blended family can be more than just managing assets; it’s about fostering harmony within their family for years to come.”
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