Tom Vaughan is a Certified Portfolio Manager and CEO of Retirement Capital Strategies. Retirement Capital Strategies is a registered investment advisor located in San Jose, California.
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QUESTION: I'm getting married soon. This is my second marriage. And my partner and me both have previous our kids from previous marriage, should we be combining our finances? And what are some pitfalls to avoid?
TOM VAUGHAN: Lots of times lots of families, second marriages for variety of reasons, divorces, you know, widows and such like that. And so there's it's two separate families. I mean, what do you think? I mean, give me some of your ideas as to how you might handle that.
Yeah, so it's kind of like merging two businesses into one. And so each has their own asset pool, they have their own, you know, kind of traditions, their own ideas and finance. And you're combining that it's a new kind of like, new one. And so you have to be open, you want to be communicate with your partner, you don't want to hide anything from them.
And you gotta treat everyone kind of equal on equal terms. And so there's kind of two things you want to think about is the now you know, your medical who's paying for education, kind of lead that short term futures and that your lifetime?
And then you also have the estate planning. So how are you going to make sure that, you know, everyone gets their fair share your estate and in the right way?
And so, one thing to start thinking about if you're pre marriage is, is it worthwhile to get a prenup?. . . Also, any kind of life insurance or any kind of policies like car insurance, house insurance, or umbrella insurance, is everyone that's going to be in your household, on their benefactors, or under that insurance to protect them. Because a lot of times we forget about these things. And, you know, my child's not on my health care anymore, but is my spouse's health care, or my ex spouse's health care, or where's this gonna be how they're gonna get paid for. And so you have to kind of combine that too.
And I would start with a new financial plan, honestly, you're starting over again, with this person, a new financial planning kind of brings out everything into the open. . .
So I see some families where it's really important that it's spelled out, if it's not spelled out, it creates all this consternation, and you know, you're getting remarried or what have you, and you want the whole group to be happy in the end. And so sometimes really getting organized and spelling it out, and making sure that everybody understands. . .
And you also need to assume that there could be some consternation with In the family if you don't spell it out correctly. And so it is, it's, it's just like a business merger, you know, there's the financial aspects of that business merger. And then there's the more soft aspects, you know, what's the cultural situation like with one company and another? How's this group of employees, otherwise known as your kids gonna associate with this other group of employees otherwise known as their kids? And, you know, it's a how do you make that come together as one family. And so I do think that the financial portion could be one of the foundations of that to kind of help that along. . .
Would you say like, having open communication between the spouses is really important for kind of like doing this?
. . . One person passes away, and that person's kids are arguing with the surviving spouse over the money. And, you know, the other kids are getting involved. And, you know, we've seen some of those situations too. And that's just where it wasn't communicated properly. . .
0:00 Introduction 0:36 Like Merging Businesses 1:09 Estate Planning Important Too 1:32 Insurance Policies 2:03 Start with a Financial Plan 2:30 QTIP - Qualified Terminable Interest Property Trust 5:05 Beyond Finances
