GOLDEN VALLEY, Minn. - Finances are one of the top reasons cited for interrupting marital bliss. Blended families potentially bring additional complications. It is estimated 65% of remarriages involve children from a previous marriage, according to the National Stepfamily Resource Center.
Dan Ament, Financial Advisor with Morgan Stanley in Wayzata joins KARE 11 Sunrise to elaborate on some of the common issues that arise when merging family finances.
Child support: One of the most contentious issues facing blended families is child support. According to the U.S. Census Bureau's latest statistics, roughly $35 billion in child support went unpaid in 2009. The average due to dependent children was $5,960 annually, yet only 61% of that money was actually paid. Custodial parents who receive child support get only about $300 per month on average.
Financial aid: Blended families applying for college aid often run into major obstacles. "It gets tricky very quickly," said Mark Kantrowitz, the publisher of FastWeb.com and FinAid.org. "Children from blended families are oftentimes less likely to go to college and graduate because they are used as a weapon to hurt the other parent," he says. Marital status and residency, as well as whether a public or private college is being considered, can dramatically increase the complexity of financial aid calculations. "Many parents are caught by surprise because they don't know how the process works, says Cindy Kohlman, the associate vice president of Financial Aid Experts. "If, for example, the custodial parent has remarried, the stepparent's income will be included in the calculation, which can reduce the amount of federal aid a child receives. (However), an unmarried custodial parent may in fact be eligible for a larger amount of federal aid."
Estates and inheritance: Blended families must take extra precautions to do proper estate planning. Beneficiary designations, wills and trusts need to be well documented and kept up to date. A variety of strategies are tools are available to accomplish final objectives. One example is using a qualified terminal interest in property, or QTIP, for a home brought into the marriage by one spouse. Other trust documents can help protect your children and assets. A QTIP trust can allow a stepparent to use an asset such as a home during his or her lifetime, but upon death, the asset passes on to the biological children instead of the stepparent's family.
Communication is key: Planning can put problems to rest ..... It is important to tabulate and document individual assets and values before the wedding. It can go a long way to protect yourself and your family if things don't work out and property needs to be split back up. If the major financial landmines faced by blended families aren't addressed, children are likely to witness more fights and arguments about money. Poor planning can also result in resentment among biological parents, stepparents and siblings. By preparing for these situations and understanding that the life of a blended family may be more complicated than that of a traditional family, parents can avoid some of the major pitfalls associated with blending family and money. And doing so can help ensure that the children don't lose out.
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