Finance Starting a dialogue and finding agreement Honest, open communication about saving, spending, financial goals and investment priorities is a must in any relationship. But it’s doubly important in second or subsequent relationships ‒ the sheer number of financial issues to address means that there’s more possibility for assumptions, misunderstandings and conflict. In an ideal world, such conversations should take place early in a relationship. Some ways to start the conversation and clear the air include: What are we trying to do? – talking about retirement portfolios, chequing accounts and credit card balances is a tough way to start a financial conversation. Instead, try talking about your vision for the future: do you hope to travel extensively? Stay close to home, so that you can spend more time with family? Are you looking to provide a legacy for your heirs or a cause that you care about? Or do you want to find a ‘forever home’ ‒ in the sun, by the lake or in another part of the world ‒ and relax? Discussing such goals openly can make money matters a little less abstract, and future decisions a little clearer. Values (not just value) – discussions about money often focus on the numbers ‒ and rightfully so. But understanding the ‘why’ behind the numbers is often just as important when it comes to building financial understanding and aligned goals. Make sure that you have a full discussion of the principles, reasons and beliefs that underlie your approach to investing, spending and any specific financial strategies which you employ to accomplish your goals. Doing so can make it much easier to find common ground and work toward compromise. Create a financial road map together – once the conversation has taken place about goals and values, it makes sense to write them down. A simple document or one-page spreadsheet that outlines financial objectives, priorities, plans and intentions provides a useful action plan for future financial decisions, and a useful ‘touching base’ point to refer back to as financial and life circumstances change. Focus on fairness – it’s pretty rare that both parties in a blended family come into the relationship with an equal amount of either assets or liabilities. Recognizing those differences honestly and building a plan that respects each partner’s ability to financially contribute to the relationship is almost always preferable to trying to mathematically split every asset or expense down the middle. Prenuptial agreements – for cases in which the inequality of assets or liabilities is particularly acute (or when the potential for conflict among extended family members is extreme), it may make sense to craft a more formal agreement. Rather than signalling a lack of trust, a properly drafted prenuptial agreement can provide clarity and protection for property brought into a new relationship and help both partners enter the relationship with an “eyes wide open” understanding of expectations, responsibilities and support. Obviously, these are highly complex legal documents so, if you’re interested in exploring one, don’t try to write it yourself ‒ speak to an experienced lawyer and get it done right. The new family home One of the most basic decisions that any new couple faces is the decision about where to live. For blended families, there are a number of questions to resolve: will one partner move into the other’s home and, if so, which one? Should the home (or homes) be held as separate property? Or should one partner ‘buy in’ to the other’s existing residence? Or would the easiest (and fairest) decision be to jointly purchase an entirely new property? It’s not an exaggeration to say that for many blended families, these are some of the most consequential questions which they will face ‒ not only from a financial perspective, but from an emotional perspective as well. Here are some specific issues to be aware of: My place or yours? – there’s a difference between a house and a home, between a piece of real estate and a place where you’ve built a family and years of memories. It’s important for partners to balance practical financial needs with the emotional attachment which partners may feel toward their respective homes ‒ particularly if one home is strongly associated with a deceased or ex-spouse. It can be a tricky conversation, and one that often demands careful consideration and a good deal of empathy. Unequal contributions – living together in a single home doesn’t always mean having equal ownership of that home. If one spouse enters the relationship with substantially more home equity than the other, it’s a good idea to document that fact, along with who will be contributing to mortgage payments, property taxes, utility bills, repairs and renovations going forward. Keeping a record can help avoid misunderstandings and protect both partners’ interests when it comes to estate planning. More on that later. Downsizing decisions – downsizing is an important element of many retirement plans. But that’s often easier said than done in blended families. Emotional attachments to a long-time home, the need to top up retirement accounts and the considerations of adult children thinking about their inheritance make the decision to downsize fraught with potential challenges, and well worthy of a full conversation rather than a snap decision. Who gets the house? – in many blended families, a home is the most significant financial asset in each partner’s estate. Which gives it the potential to be muchfought-over and disputed by children in the case of unclear ownership or a vague, poorly written estate plan. We’ll discuss 28 | www.snowbirds.org
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