Financial planning

A primer for blended families

2017-06-29

According to the most recent data available from Statistics Canada, approximately 465,000 Canadian families are blended, meaning one or both parents have children from a previous relationship. The portrait of a typical Canadian family is changing rapidly, especially in Quebec, where couples are less likely to marry than elsewhere in the country and where blended families are becoming the norm.

When these families first come together, the first priority focus is usually towards helping the children adjust.  Sound financial planning should run a very close second. Based on the statistics here in Quebec, a transparent blend of finances may very well be a bigger commitment than marriage.

Experts recommend having an open discussion about finances as early as possible because there are significant risks when delayed. For example, if both parents own a home and sell one after they are married, it will be subject to capital gains tax because the blended family may only declare a single principal residence.

Parents in blended families should declare all of their financial assets to each other so they have a complete and accurate picture of their new family’s finances. One partner may have an impressive investment portfolio, while the other is paying down debt. One partner may have a college fund set aside for their child, while the other does not.  The potential may exist for envy and resentment to undermine the family dynamic.

In Quebec unlike other provinces, marriage does not render previous wills void. When a family blends, it is of utmost importance to review estate planning documents, including beneficiaries on registered plans and insurance policies to ensure security for all family members.

Single parents may lose significant government benefits and tax savings when they join their families.  On the flip side, new spouses have access to potential tax advantages such as pension income-splitting and spousal retirement savings plans.  Every situation is unique and experts strongly recommend that parents in a blended family file their taxes with the same professional.

On their journey to harmony and happiness, much advice is available to help blended families succeed.  The emotional dedication and commitment towards assimilating new personalities and circumstances is admirable, but this can be exhausting leaving little energy to tackle financial subjects.  A CFP® or CERTIFIED FINANCIAL PLANNER® professional has the expertise, and detachment, to provide an honest evaluation and customized recommendations/referrals – to address individual financial planning concerns along with the financial needs of the blended family unit.  Blended families face many unique challenges; a CFP professional can help shorten the list.