In this episode of Your Life Simplified, host Whitney Reagan, senior wealth advisor, and Christina Lynn, director, wealth strategist, dive into the different approaches to blended family finances. They discuss how to navigate conversations around combining finances or keeping things separate, managing child expenses and setting up a long-term plan that is right for your family dynamic.

Transcript

Whitney Reagan: If you’re a part of a blended family, you know that there can be additional complexities to your situation. I hope that you keep listening because today we are talking about blended family finances.

Welcome. Welcome. Thanks for joining us for another episode of Your Life, Simplified. I’m Whitney Reagan, senior wealth advisor here at Mariner, and I’m joined by a repeat guest, Christina Lynn. She’s also one of my favorite people to talk to. Christina has a myriad of credentials. She is a Ph.D., a CERTIFIED FINANCIAL PLANNER® and also an Accredited Financial Counselor®. I almost didn’t get all of those in. Christina, I wanted to make sure I named all of your credentials because I think it’s important for the audience to know first that you’ve spent so much time educating yourself, but also to show that you do have a lot of credibility in what we’re talking about today. How are you?

Christina Lynn: I’m good. Thank you, Whitney. I appreciate that.

Whitney: I am very excited that you’re joining us again and that we get to have another conversation around family dynamics and, more specifically, blended family finances. Sorry, I didn’t mean to interrupt you. I feel like you were going to say something. I just wanted to ask quickly what made you so excited and passionate about this topic? Because I feel like it was your idea.

Christina: Yeah, I probably think I did throw it out there as a topic. I think that it’s not a taboo topic, but it’s just not a popular one. It can bring up some negative feelings, maybe some bad memories. It’s a hard topic, but that doesn’t mean we should ignore it. I think it kind of helps to talk about it in a neutral setting. I am in a blended family, so I have skin in the game here, and I have been very interested in cracking the code to how to optimize blended family finances. So yeah, that’s my background with it.

Whitney: It’s your background. It hits close to home because you are part of a blended family, and also I feel like you deal a lot with estate planning and you specialize in helping with estate planning, and you probably have done this a lot with blended families.

Christina: Yeah, it’s a good point, Whitney. So I daily am helping advisors work on more complex estate planning cases, and there’s different statistics out there depending on the source, but it does seem to ring true that up to about half of households, including our clients, have some sort of blended family. So it is very common, and it’s much more complex when it comes to financial planning and estate planning in particular.

Whitney: Wow, I didn’t know half of our families. That is quite a statistic. I mean the divorce rate is above 50%, so I guess it makes sense.

Christina: Yeah, I mean, again, depending on the source, it may not be that high, but it is quite common, so it is time that we start talking about this proactively.

Whitney: Well, I feel like it’s maybe in our wheelhouse to have these tough conversations because we’ve talked about tough topics before, haven’t we?

Christina: That’s right, yeah. Give us those tough topics. We’ll talk it through.

Whitney: Just going to take the bull by the horns! Okay. Let’s get started. We’ve talked about this a little bit in the past and also just preparing for the podcast, and I feel like the most important place to start, or at least you emphasize the important place to start is really having clear communication. So do you want to maybe dig a little deeper on that?

Christina: Yeah, so that is a theme when we talk about blended family finances, and the reason why it’s a theme is it is the solution to a lot of the problems that we encounter because these topics are tough. For example, how are we going to handle our money now that we have blended our finances or our families? That simple question can be very triggering. It can be really complicated. It can cause a lot of conflict. So, what we see happen typically is that a lot of those topics, those decisions people procrastinate on talking about it or coming up with a plan, and that then leads into bigger conflict down the road and even what we call financial infidelity, which is kind of hiding some of the money decisions or transactions that one or both spouse are making, and all of that can be avoided with proactive conversation around it, but it’s definitely not easy.

Whitney: No, and I feel like this is some good advice for any family, whether you’re blended or not or you’re just getting married for the first time, but we’re kind of talking about after your first marriage and adding additional possibly bonus children and all of those different factors, but just having that conversation about are we going to have joint accounts or are we going to keep our finances separate? And some people, I mean I have a lot of clients where they keep their finances separate, but they don’t really know why. It was just the conversation was never had, and that can blow up in your face later.

Christina: And sometimes it doesn’t, right? Sometimes that works for people, but I would say that with blended families, it’s much more important to have the conversation and come up with a plan because there’s a lot more — the probability is much higher that it will blow up in your face if you don’t.

Whitney: Do you have a recommendation between joint accounts or keeping them separate?

Christina: Yeah, we’ll get to that granular level in a moment, but first I think it’s important to back up and just have that conversation about how do we want to handle money between us and our families. If you have a two-income household, do you want to pool your finances and have shared expenses and shared savings? Do you want to keep everything separate? If you have kids from prior marriages on one side or both sides, how do you want to handle expenses for either or both? Having those high-level discussions then can lead to, okay, now let’s figure out how to implement our plan. If you want to pool your resources, joint accounts work great. Both people can have full access to those accounts. Both are full owners. There’s also nothing wrong with having your own individual accounts, either one spouse or both spouses. What’s fair isn’t necessarily the same in every couple.

Sometimes what works best is to have — so let’s say that one spouse gets child support from a previous marriage for a kid. Is there anything wrong in your situation from having that child support money go into an individual account to pay for [that] child’s expenses? In some blended families that might be a terrible solution, and in other blended families that might be a good solution. There’s no right or wrong, but it’s about talking about what works for your situation,

Whitney: And I think you could even have a combination of the two, right? You have your own individual accounts for maybe the individual expenses of your biological kids, and then maybe you have a joint account for your home that you have together. There’s a lot of ways to map it out. So I think to your point, the best advice is to be proactively mapping out a plan. And I mean you can adjust it as you go, but at least you’re already going through that exercise of talking about it first and knowing how each person feels about it and sharing your feelings about it.

Christina: Yeah, I’m glad you brought that up because I’ll share my personal experience with this is probably no surprise. I’ve been very proactive about this topic with my marriage, and this is an evolving topic for us. We meet on it at least annually to discuss this, and we’re adjusting constantly. So, we started our marriage by combining our finances, and now we’re actually going to kind of pivot to having — we’re probably actually going to start by having just a separate account for my husband. With his personality, he just needs a little bit of a fun budget to spend without me eyeballing it all the time, and I don’t mean to be critical, but when I see certain expenses, I’m like, well, what was this for? And not only is that not needed, it also causes unnecessary anxiety. So for a solution that we’re finding as we evolve with this, it’s okay in our situation to have a little bit of independence. It’s within our budget. I don’t need that for myself, so that’s going to be our next iteration.

Whitney: I think that’s amazing advice, and I’m happy that you shared a personal experience because I’m sure everybody can relate to that. I imagine that it was also stressful for you to eyeball everything, and it’s probably good for both of you, right?

Christina: Well, I’m — surprise, surprise, again— I’m the financial officer of the family, so I have to keep an eye on things, right? Otherwise, it’s going to get out of control and it’s not going to progress on our plan. But that also, in his perspective, that was going a little bit too far, and it didn’t need to go that far. So finding a little compromise that works that is right for our situation, I think it’s going to help.

Whitney: Yes, I love the compromise and the kind of adapting to each other’s personalities is really terrific advice. Is there anything you wanted to touch on before we kind of drill down into the more, the deeper level of separating versus joint?

Christina: Well, just the hot topics that tend to rise to the surface and cause conflict are bigger expenditures. Do we agree on how much we want to spend on our home? Does one spouse want a big fancy house and the other want a small one and prioritize saving for retirement? How are you going to come to a compromise on that? One spouse might want to eat out all the time, and they’re used to that convenience and luxury, and the other’s not okay with that. In a blended family, you both come from kind of strong, independent narratives and now you might need to find new common ground. So just coming up with how you want to handle those things. And even giving money to charity or to church or how much are you accustomed to saving for retirement, talking about those things and finding a happy medium.

Whitney: Even when it comes to paying for education, there’s a couple of different layers to that. It’s possible that part of the children go to private school and part of the children go to public school, so are we going to continue to pay for the private school? How are we going to adapt to that? But then on another layer, are we going to pay for their college? One of the parents might have already had in their head that they wanted to pay for that child’s college, but then now you have more kids. How are you going to save for that and how are you guys going to communicate through that?

Christina: Yeah, those are really touchy issues, but important conversations to have because if you don’t, that problem isn’t going anywhere. It’s just boiling in the background, and the kids are going to need therapy over it in the future. You’re going to need therapy over it in the future, so just deal with it now, right?  And you can reach out to help if you need a neutral party to facilitate those conversations.

But you brought up a great one which was more of a bigger ticket item, education, how do we handle discrepancies in how we treat his kids versus her kids or some sort of blended approach to that. It goes down to a more granular, lower-ticket cost ticket items like phones for example. Does one kid always get the latest iPhone and the other kid gets a hand-me-down TracFone kind of thing? They notice that, and if you don’t deal with that — and I’m not saying you have to treat all the kids the same — but if you don’t talk about it and debrief your kids with the situation and how you are planning what your plan is as a blended family to handle that, they’re left to deal with that on their own and they’re likely coming up with a story that is not healthy.

Whitney: That was a great segue into the more, I guess, parenting topic of how you’re parenting your kids, and I don’t want to get too deep into recommendations on parenting because we’re more focused on finances, but I did want to ask your advice. Have you seen before in your experience where there have been children that are treated differently or maybe that paying for more for one kid over another, how do you handle that? And maybe can you just touch on that a little bit?

Christina: Well, I think how you handle it is you start by just addressing the elephant in the room because again, even if you don’t handle it, the kids are handling it on their own or the more disadvantaged spouse in that case is also handling it on their own by trying to process it, and it’s causing more grief and tension and conflict that is just going to build up over time. And so I say would say definitely there’s issues that are boiling behind the scenes that are better off if you just address them and find a way that either to compromise on it or a narrative that you can share with your kids like, “Look, this is what our situation is. I know it‘s not fair, but this is how we‘re choosing to handle it.”

Whitney: You said disadvantaged spouse and it made me think of different income levels. Is there anything that we can unpack there if the spouses have different income levels and how to approach that topic?

Christina: Yeah, so again, there’s no right or wrong answer here. Every couple is going to be unique with how they want to handle this, but I guess I have seen cases where spouses make exactly the same and their benefits are the same, but it is more often than not that one spouse makes a lot more money than the other one. And some couples approach it like, we just want it to be 50-50 equal on everything, and that’s great. That’s a wonderful egalitarian approach to it. That doesn’t work for other people, and that’s okay too for those couples, they find compromises where maybe they put a percentage or a certain dollar amount that gets siphoned off into one account that goes for the higher-income earner spouse, so they get to maybe spend more money on clothes or on a trip with their friends every year kind of thing. Again, there’s no right or wrong, but it’s just a conversation and a plan that can be developed to help relieve some of this tension that doesn’t need to boil up behind the scenes.

Whitney: All great points that we’ve already touched on so far. I want to shift gears a little bit and talk about estate planning for blended families. I think we kind of talked about how you are really involved in estate planning, so I feel like that’s something that we should hone in on here is updates to estate planning. Do we need to change their estate planning? I mean, what are your thoughts here, Christina, on how to, I guess, go about the estate planning when you have a blended family?

Christina: Okay, yes. Well, the first point is it’s more important to come up with an estate plan, an intentional one, when you have a blended family than when you have a traditional family because if you don’t, you are likely to disinherit kids or create family conflict where it can be maybe not easily avoided, but at least preventable to some extent. Don’t stick your head in the sand, address it, talk to a professional that can help you walk through the options.

So, I wanted to share a quick story about how my husband and I approached this. So he doesn’t have kids from a prior marriage. I do, so in the spirit of just proactively conversing about these hard topics, we talked about how we would want to leave our assets if one or the other person dies. And then we had a baby together, and so do we want to treat the two kids from my previous marriage any different from our son together? And so again, there’s no right or wrong to that, but just to share a personal story, everyone kind of has awkward conversations that they need to have in a blended family, and it can be fine. It turned out really well and it was a really sweet conversation and it really filled my heart with joy to come up with a solution to that.

But I’ll also share some of the more sad things that I run into in my work with more advanced estate planning cases where clients have a lot of money. What happens often that I see in cases that go wrong in blended families is that they don’t have any sort of protection put in place for the children, their biological children, if they’re in a situation where they get remarried. And what we see happen often is that the assets then go to the new spouse, which if they get remarried, they can completely leave the bloodline and leave the biological kids really upset [and] traumatized from that. There’s just so many different scenarios that can play off of that one type of setup.

Another big issue that we run into with estate planning and blended families, just because people don’t realize what could go wrong if you don’t proactively plan with this, is they set maybe a new spouse or one of the kids up as the successor trustee of the trust, so they’re in charge of other people’s money in the family for one reason or another. Maybe one kid isn’t very responsible with finances, but what that does is that you’re setting yourself up for pretty uncomfortable family conflict after the biological spouse passes away. And so just talking about, “Does a corporate successor trustee make sense for us?” I think in blended families, the answer is yes to that question a lot of the time.

Whitney: Yes, and you also don’t want to — I think these are fantastic points. I’ve had experience with this a lot with clients and just personally. Your normal state of mind is you don’t want to expect the worst in people and you want to expect the best in people, but unfortunately, the best way to go about estate planning is to expect the worst and having the really uncomfortable, morbid conversations, which are also expecting the worst. But if you expect the worst that can happen, then the best thing that will be for your family is that you’re protecting the individuals in your family, and you’re protecting the assets, and you’re also allowing kids to be able to grieve for the loss of their loved ones rather than having to deal with internal conflict with the blended family or maybe with the stepmom or the stepdad or however it works out.

Christina: Really well said, Whitney.

Whitney: Thank you. I do want to touch on one more thing because I feel like the whole theme of this conversation has been, really, transparency and proactive communication, and you mentioned something that I thought was so lovely, and you call it “money dates.” So will you tell us, well, what are money dates, and what are they all about?

Christina: Yeah, so I am not the one who came up with this.

Whitney: You can’t take credit for it?

Christina: No, unfortunately, I know of two academics who have written on this, Dr. John Gottman and Dr. Sonya Lutter. They have books that walk you through a money date and they’re so helpful because they’re kind of fun, structured ways to have conversations about these topics in a way that sort of alleviates the pointing of the finger or pressure because it’s already a structured activity or conversation outline that you can just follow that really kind of helps both spouses open up and have a positive conversation about these really hard topics, and you can really break through some tough points and come up with good solutions that work for both people on these money dates. But the basic concept behind it is to get out of your normal environments. So don’t stay at home with kids running around, but go out for a date, hire a babysitter if you have young kids, and have a topic around money that’s planned out that you want to discuss. And like I said, there are already some structured activities that you can follow on these money dates, but they have been so helpful for my husband and I to do. Sometimes they’re tougher. There have been a tear or two shed, but more often they are really good experiences and even those tougher experiences, it was kind of like a necessary pain to go through in order for us to figure things out.

Whitney: That’s one takeaway for me for sure. I think the money data is a terrific idea and you have to grow and evolve with your spouse, and to do that, you have to have some of those tears and hard conversations.

But this has been so enjoyable for me, and I know that Christina has done a lot of research around blended families [and] blended family finances, and there’s some additional resources that we will add in the show notes. But other than that, I always enjoy talking to you, Christina, so I am very grateful that you were a guest again. So thanks for joining us, and thank you to the audience. Thanks for listening. If you enjoyed the conversation today between Christina and myself and you would like to hear more from Mariner, please like, subscribe or follow wherever you listen to your podcasts. I hope you have a great rest of your week. Thanks.

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