The coming together of two families can be an equally positive yet confusing experience for many: a new living arrangement calls for a proper review of your financial situation.
According to the Office for National Statistics (ONS), multi-family households - that’s households containing two or more families - were the fastest-growing household type in the decade to 2017, increasing from 215,000 households in 2007 to 306,000 households in 2017.1
With this significant shift in living arrangements, if you belong to a blended or multi-family household, thinking ahead about your financial situation is important. If you’re cohabiting, remarried, or have moved in with your civil partner and you both have children from a previous marriage/relationship as well as your current one, effective estate planning could help make sure you and your loved ones are looked after just as you intended.
Below are three important points to think about when it comes to estate planning for your blended family.
Protecting children’s inheritance
Estate planning and inheritance tax are important when it comes to blended families because financial planning in this situation can get very complex. Bringing children into a new relationship means thinking about the future now, and how you want your wealth to be distributed becomes a priority.
Along with the nil-rate band, leaving your wealth to your spouse or civil partner has been bolstered by the introduction of new allowances such as the residence nil-rate band. But when it comes to children, setting up a trust could help in protecting what’s theirs and preventing future issues – especially after parents pass away. However, trusts come with their own restrictions, and might not be suitable for your circumstances.
The importance of writing a will
One of the elements of sound financial planning is knowing where you want your wealth to go, and how to do that. The simplest way to remove future financial worries for your blended family is to put a will in place or update an existing one.
Depending on your family arrangement, intestacy rules do not apply to stepfamilies unless the parent has formally adopted the stepchild(ren). Under these rules, only married or civil partners and some other close relatives can inherit wealth. This makes getting a will in place all the more important.
Speak to an expert
Getting professional help to arrange your financial affairs could help put you and your family in a better position both now and in the future.
With blended families on the rise and the various complexities that come with it, a financial adviser can use their experience and knowledge to tackle very specific multi-family financial planning issues - especially when it comes to protecting and passing on your wealth.