Financial Planning for Blended Families

Speaker 1 – 00:00
When we talk about blended families, the spouse wants to provide for the new boyfriend or girlfriend or second
spouse, but also wants to keep in mind I have kids and I need to provide for them too. How do I do that? What’s the
most effective way to do that? How do I communicate it? This can be a very emotional topic. It’s always better to
have a plan in place as opposed to being reactive where the emotion can rise.
Speaker 2 – 00:25
In terms of handling cash flow, we really like the system called reverse budgeting, separating your pay into really
two accounts.
Speaker 3 – 00:31
So where you’re trying to start a new relationship with your new significant other, you’re probably asking the
second person to now sign a prenuptial agreement. What we brought in the marriage is separate. Anything
individual name stays separate throughout the marriage. Anything in joint name with the new marriage is jointly
held. And so this new spouse is probably thinking, well, do you love me because you’re giving a lot of money to this
person. That person didn’t have a prenup. Why do I have to sign a prenup? So can be a really awful situation unless
you have a financial plan. But the breadwinner dies, what happens? It doesn’t work out.
Speaker 1 – 01:04
My will is directed to my kids, but I recognize that I have to provide for my significant other in some way. What are
the ways that we can do that? If significant other does become a spouse, there is a marital trust that can be put in
place.
Speaker 3 – 01:19
A really important strategy, especially for high net worth.
Speaker 1 – 01:22
Oftentimes we’ll get the question, how? How do I communicate this? Do I want to communicate this Will.
Meeting Title: 01 Financial Planning for Blended
Families (For tr…
Meeting created at: 19th Feb, 2026 – 12:37 PM
1 / 13
Speaker 3 – 01:28
Kill any chance of a plan working in real life. Blended families require a lot of sophisticated financial planning. This
can make or break not just the financial plan, but also the relationship in some circumstances. Today we’re going
to talk about all the problems we’ve seen and specifically how to address those problems with good, sound
financial planning. Blended family financial planning. We’ve dealt a lot with this at ewa. We find it’s, you know, really
in the high net worth space, pretty common that there’s. There can be a lot of problems that arise when, you know,
you’ve got kids from a prior marriage, you know, a second marriage, and now there’s other kids or other spouses. A
lot of financial implications come into play then, but also a lot of relational implications come into play as well.
Speaker 3 – 02:17
So, Jimmy, what would you say, like, if you summarize, how important is it for a financial plan to be in place for
when a blended family is in play?
Speaker 1 – 02:28
I Think it’s really important. From my experience, this can be a very emotional topic. And so anytime you have
emotion in a situation, it’s always better to have a plan in place as opposed to being reactive when a situation
occurs where the emotion can rise. And so, yeah, when we talk about blended families, it can be a situation where
we have husband or wife who is remarried. Maybe there’s children with that second marriage, maybe there isn’t.
But the general theme is the spouse wants to provide for the new boyfriend or girlfriend or second spouse, but also
wants to keep in mind I have kids and I need to provide for them too. How do I do that? What’s the most effective
way to do that? And then most importantly, how do I communicate it? Those are the issues that need to be.
Speaker 1 – 03:21
That need to be thought through.
Speaker 3 – 03:22
Yeah. So let’s talk through some specific problems and identify solutions. I would say in general, the problems we
see. So, you know, typically a blended family occurs after obviously a divorce. And so usually there’s going to be
some kind of baggage that involved. Right. So let’s say it was a divorce that happened from one spouse that was a
higher earner. They’ve probably just been through a six to 36 month process of, you know, potentially hopefully not,
but fighting in courts with attorneys involved and feeling like that ex spouse was coming after them for every
penny they could get. Right. And so now they’re entering a new rule and usually there’s a division of assets. Usually
50 or 60% of the assets go to the prior spouse who wasn’t earning as much. There’s child support implications.
Meeting Title: 01 Financial Planning for Blended
Families (For tr…
Meeting created at: 19th Feb, 2026 – 12:37 PM
2 / 13
Speaker 3 – 04:10
And so just a quick review, once you to get divorced, typically after everything’s signed and delivered, asset splits
are final. You have alimony, that’s final. But then what’s always modifiable in most states is child support and child
custody. And those are different formulas. But if you have 50 custody, it’s a formula and you know, tax returns can
be reviewed. So where you’re trying to start a new relationship with your new significant other or spouse, you’re
probably asking the second person to now sign a prenuptial agreement with, given all of that you’ve been through,
you’re probably shoveling off a bunch of money still, if you’re younger to this ex spouse. And so this new spouse is
probably thinking, well, do you love me because you’re giving a lot of money to this person and that person didn’t
have a prenup.
Speaker 3 – 04:58
Why do I have to sign a prenup? And as the breadwinner, you’re probably thinking, was this person with me for the
wrong re is, you know, so there’s all these psychological things that can come up. And a lot of times we enter these
situations where the blended family already exists and all this, like all the stuff I just described is silently there in
the room, and it’s never really been addressed.
Speaker 1 – 05:19
The other situation there, unfortunately, it could also be a death. So you now have this situation where the
surviving spouse is, you know, looking to move on and doesn’t want to be alone and finds a significant other and
now has to deal with potentially providing for the significant other, but recognizing that I have children from, you
know, the deceased spouse. And how does all of this interact and play.
Speaker 3 – 05:48
There’s lots of other issues that we’ve seen. I think it’s going to be most beneficial if we start addressing some of
the solutions as we go. If a blended family comes to us and they’re looking just for, let’s remove stress, let’s make
sure we have togetherness in the relationship. We’re handling decisions, Transparency is on the table. I really view
this in three ways. So one, just what are the best practices day to day? Like, from a cash flow perspective? You see
a lot of, like, they’re filing taxes separately. The spouse that was already divorced is probably trying to not maybe
disclose everything, but in the prenup, you have to. There’s a lot of heavy weight in the room when we have these
conversations. So what do we do day to try to alleviate that stress?
Speaker 3 – 06:24
Meeting Title: 01 Financial Planning for Blended
Families (For tr…
Meeting created at: 19th Feb, 2026 – 12:37 PM
3 / 13
Then I would say secondly, let’s talk about if things don’t work, how we recommend the structure while also getting
togetherness but also protecting, you know, each other. And we’ll talk about estate planning as well, how to set up.
So it’s first talk day today.
Speaker 2 – 06:37
Yeah, I think day to day organizing cash flow is extremely important. Trying to remove decision fatigue and try to
automate as much as possible because of all the circumstances that you reference. So in terms of handling cash
flow, we really like the system called reverse budgeting, which is basically budgeting but backwards and so
separating your pay into really two accounts. So the first account gets a certain amount every month, and that is
meant to just pay your bills, handle all your savings, handle all your insurance premiums, save money, you know, so
let’s say you’re netting 20,000amonth after tax. I’m just making that up. Let’s say 12,000 of it is to really run your
life from that standpoint. So that goes into bank account 1. All of those payments are really on auto draft. And
that’s meant to almost be set.
Speaker 3 – 07:24
It and forget it.
Speaker 2 – 07:25
So then the remaining 8,000amonth in this example would go to bank account number two. And then that’s what
you would use to pay your credit card every month. And so this removes a lot of decision fatigue. And particularly
for blended families, this removes a lot of the, you know, well, I spent this on this month and then so I can spend
this. And there’s, it removes that finger pointing in terms of who’s spending what, because you basically give
yourself an allowance every month to spend. So I really like that. It removes a lot of decision fatigue and helps
organize everything from a cash flow standpoint.
Speaker 3 – 07:54
I’m thinking, you know, specifically of, oh, a couple examples. But so one remarried, one spouse is like a
specialized physician, you know, making seven figures. And the, the new significant other is making about a
hundred thousand a year. And so the specialized position is paying, you know, two kids with the prior significant
other. And so they’re paying north of $7,500 a month for a child support. So assets have been split. That’s all done.
And so what we did in Reliant, you know, relationship to the structure that Ben just mentioned is they had a
prenuptial agreement in place. Basically, you know, what we brought in the marriage is separate. Anything
individual name stays separate throughout the marriage. Anything in joint name with the new marriage is, you
know, jointly held. So there’s some flexibility.
Meeting Title: 01 Financial Planning for Blended
Families (For tr…
Meeting created at: 19th Feb, 2026 – 12:37 PM
4 / 13
Speaker 3 – 08:42
And the risk to the lower earner in this is that the higher earner doesn’t have to fund anything in the joint account.
They could try to keep everything. But I think if the relationship’s going well, you try to get everything in joint name
as possible. So in this case, we opened up a joint account, a joint checking account that covers, you know,
basically their cash flow is about 45,000amonth, net of taxes. They’re both maxing out their mega backdoor roths.
And so 45,000 months coming in. We put 20 in this joint account because the joint account covered basically their
mortgage, car payments and utilities. And so right away that establishes the togetherness that covers all their
lifestyle, their bills. And then what we did is that was funded all from the breadwinner’s paycheck.
Speaker 3 – 09:25
The person making 100,000 a year was netting like it was like 4200amonth because there was heavy contributions
in the 401k. And so that broker said, you keep all of that money in A separate individual account. And that’s for all
your swiping.
Speaker 2 – 09:36
Right.
Speaker 3 – 09:36
So all of your variable expenses. The breadwinner kept the rest of their paycheck in a separate account. So you
have togetherness of lifestyle. You also have, you know, so your own autonomy in these individual accounts. And
that’s really reverse budgeting is figuring out what’s all those fixed costs, putting that in one account, forgetting
about it, and all your variable cost, keeping separate. But that was just a quick overview of what a reverse budget
would look like for a blended family. Absolutely. Assume you’re a blended family now. Right. And so we’re in the
midst of it. We’ve handled the day to day, you know, Ben, we’ve set them up with the reverse budgeting structure.
We’ve handled cash flow, we’ve figured out how we’re going to file taxes, we have a prenuptial agreement. Both
spouses feel good for protected, you know, not always the easiest conversation.
Speaker 3 – 10:19
So now we’re thinking long term, like, how do we set up, you know, long term, like what happens if in this example,
Meeting Title: 01 Financial Planning for Blended
Families (For tr…
Meeting created at: 19th Feb, 2026 – 12:37 PM
5 / 13
like the breadwinner dies? What happens if, you know, it doesn’t work out? So bigger financial planning with bigger
repercussions. Jimmy, how do we break that down?
Speaker 1 – 10:36
This is really where most of the discussions I’ve had with clients in this situation center around. So obviously
through the reverse budgeting and everything you just went through, if both breadwinner and, you know, significant
other are living, you work through that, you get into your day to day routines and hopefully everything’s great. If
there is a death, that’s where the plan really needs to become live. So everybody understands, you know, who’s
getting what. So from the standpoint of an estate plan, generally speaking, when I’ve been involved in situations
like this, and again, not every situation is the same, but for the most part, let’s say the breadwinner has always said
to us, my significant other, second spouse, however we’re defining that they’re not getting into my will. My will is
directed to my kids.
Speaker 1 – 11:34
But I recognize that I have to provide for my significant other in some way. What are the ways that we can do that?
And from experience, there’s really, there’s a few. The first one is you can always buy a life insurance policy and
direct it specifically to, you know, your significant other.
Speaker 3 – 11:54
Don’t have to marry. You can choose any beneficiary.
Speaker 1 – 11:57
You can choose any beneficiary. It’s very clean. It avoids probate because we have A listed beneficiary, it’s. It’s very
easy. That’s number one.
Speaker 3 – 12:06
And I’m going to say one thing further. You could let that, for that spouse to be extra comfortable, you could let that
spouse own the life insurance. That way, if the relationship strain is there, you don’t have to. That spouse has the
control and knows they’re taken care of.
Speaker 2 – 12:19
Meeting Title: 01 Financial Planning for Blended
Families (For tr…
Meeting created at: 19th Feb, 2026 – 12:37 PM
6 / 13
No matter what owning a life insurance policy means, you have full autonomy of it. You can change the
beneficiary.
Speaker 3 – 12:25
That’s right.
Speaker 2 – 12:25
You have the first spouse technically own the policy and the second spouse was just the beneficiary. The first
spouse, technically, as the owner, has the power to change the beneficiary at any time. So you’re saying you can
move that ownership to the spouse that they feel.
Speaker 3 – 12:38
That’s right. So if you were on like, let’s say you had a girlfriend, you’re. You’re the breadwinner, Ben, you say, hey,
I’m going to take care of life insurance. I’m going to buy a $5 million life insurance. There suddenly this relationship
strain. You could change the beneficiary immediately to what’s. If you had kids hypothetically in the future, you just
change it that day, she wouldn’t even know. And so making her, in that example, the owner. No one’s changing the
beneficiary other than her. And so she has full control of making sure she’s secure whether the relationship works
or doesn’t work.
Speaker 1 – 13:04
Gives complete peace of mind.
Speaker 3 – 13:05
Yeah.
Speaker 1 – 13:06
Meeting Title: 01 Financial Planning for Blended
Families (For tr…
Meeting created at: 19th Feb, 2026 – 12:37 PM
7 / 13
Which is what the goal is here for sure. What we’re trying to do is create peace of mind. So significant other thinks,
when breadwinner passes, I’m going to be okay.
Speaker 3 – 13:15
Or if the relationship doesn’t work.
Speaker 1 – 13:16
Exactly. So, you know, we’re generally talking about a life insurance policy. It’s probably going to be a permanent
policy because we want this policy to last forever. It’ll build some cash, which is also nice. And if, you know,
significant other is the owner, creates all kinds of good feeling there.
Speaker 2 – 13:33
Really quick. Just while we’re on the topic of beneficiaries, it’s so important to make sure that these are updated
because, Matt, these override a will. So if you have a beneficiary on an old 401k or an old account that is, you know,
not who you want it to be, your will says something, your beneficiary says something else.
Speaker 3 – 13:52
Beneficiary will trump that as well. Is meaningless. If your 401k is the ex spouse and your will Says your new
significant other doesn’t matter. That money’s going to the ex spouse. So the will is great to have, trusts are great
to have, but you have to go and update all your accounts to say your will or to say your trust or to say, you know,
whoever you want. It is a great point. You won’t believe how many people still have their ex spouse or their.
Because it’s a pain. I mean, sometimes you need to get notary or show divorce because in, you know,
Pennsylvania, you need a spouse’s signature and that the foreign K administration, they don’t know if you’re
divorced, right? So you have to produce all this documentation. It’s just a pain in the butt.
Speaker 3 – 14:26
So many people say, I’ll take care of that later they die. And now suddenly the person they fought with for years is
getting millions of bucks.
Meeting Title: 01 Financial Planning for Blended
Families (For tr…
Meeting created at: 19th Feb, 2026 – 12:37 PM
8 / 13
Speaker 1 – 14:32
So now you gotta cross the I’s and dot the D. And.
Speaker 3 – 14:35
Jimmy, just an example, what you’re describing, I’m thinking of just a client case of like, okay, so you know the guy,
nasty divorce, three kids. The guy is dating. They’re dating for 15 years, they’re engaged, but he’s never gonna get
remarried and pick them up. This is like a real life example, obviously, you know, confidentiality here. But like the
reality is, like, before this person became our client, all of the money was going to a trust for the kids. The kids
viewed the fiance just as much of a mom as the expat. It was, you know, very bad, tumultuous situation. And so
before we put a plan in place, like had this gentleman died like his kid, the. All the money would have gone into a
trust for the kids. The fiance would have gotten literally nothing.
Speaker 3 – 15:21
Now the kids are getting pulled, you know, back and forth between are we allowed to talk to or do we have to
mom? It just can be a really awful situation unless you have a financial plan in place.
Speaker 1 – 15:31
Absolutely. So absolutely we’ve got the insurance policy. That’s an option. Another option. And again, we’ll call this
whether a significant other is a spouse or not a spouse at this point. You can always put real estate in the
individual’s name as well. So that also provides a lot of peace of mind. But with the real estate should also come
some type of plan that provides an income stream for the surviving significant other. So even if there isn’t a
mortgage on the property, we’ve got enough money coming in to provide for real estate taxes, upkeep this, that and
the other. So along with retitling the property, there should be a plan in place to provide some type of income
stream for the significant other as well. So that is a second option.
Speaker 1 – 16:16
So again, life insurance policy, real estate in significant other’s name, two very good options.
Speaker 3 – 16:23
And really important. You’re saying significant other. Those options you’re describing are available even if you’re
Meeting Title: 01 Financial Planning for Blended
Families (For tr…
Meeting created at: 19th Feb, 2026 – 12:37 PM
9 / 13
not married, as you can do whatever you want.
Speaker 1 – 16:30
And oftentimes from, again, my experience, there is a situation where the surviving breadwinner doesn’t want to
get married again.
Speaker 3 – 16:39
Right.
Speaker 1 – 16:39
And so there’s a little bit of push from the significant other to get married. Breadwinner doesn’t want to get married
again, but wants to provide. So again, there’s all these dynamics coming into play. So again, life insurance,
property, these are all very simple things that can be done that can provide peace of mind and make everybody feel
better. If significant other does become a spouse, down the road, there is a marital trust that can be put in place
which again allows for second spouse to take income from the trust, but the trust corpus will pass directly to
breadwinner’s kids. So again, coming back to. If the goal is to provide for either significant other or second spouse,
but kids will always be in breadwinner’s will, that’s a very good document. That kind of solves both of those needs
as well.
Speaker 3 – 17:37
Yeah, very well put. And navigating that with the new significant other and the. It’s a very tough conversation. And
having a third party to help navigate, understand, you know, the different baggage, different triggers that could
exist, is very important to have that not just a successful conversation, but actually be followed through the plan.
So, Jimmy, you talk about the marital trust and that. That one’s really, I think, extremely important. The. So
example, I would say real life example. So you have, you know, and we’ve seen this both ways, right? So the, the
new spouse is going to, you know, obviously want assets directed if there’s an income or wealth difference, and
then the kids are going to feel the same way. Like. Or what. What’s happening if you’re giving everything, especially
if you have this conversation.
Speaker 3 – 18:18
So as a breadwinner, you don’t want to get divorced again for psychological and financial reasons. Whether you
have a prenup or not, it’s still, you know, very tough on the kids, on your finances, on the relationship, on yourself.
The reality is you’re managing, you know, your kids, you’re managing your new relationship, you’re managing
yourself because you’ve just been through a very tough Time or, you know, at some point that probably carries with
Meeting Title: 01 Financial Planning for Blended
Families (For tr…
Meeting created at: 19th Feb, 2026 – 12:37 PM
10 / 13
you for life. So the marital trust, I think is a really important aspect because one of the things you have to think
about as well if you’re remarried is if you decide to, you know, have everything directed to your new significant
other, new spouse, and you die early and like you have young kids, that person may get remarried, probably likely
will get remarried.
Speaker 3 – 19:04
And then, you know, is any money going to go to your kids? Your new significant other or spouse has their money
philosophy down because money is one of the most triggering things that, you know, exist from childhood and up.
And we all have a kind of like our stories, we plan our head around money. So the marital trust, I think is a really
important strategy, especially for high net worth, where you can have, you know, I’m just thinking of an example.
I’ve got a client worth about, you know, $25 million. And most of the money before his second marriage was
directed towards his kids. And so the new spouse didn’t feel, you know, provided for, but was much younger.
Speaker 3 – 19:37
So as we started to put together in a place, we started putting, you know, a lot of assets and joint title that would
go to the spouse. But then the marital trust, I think was the most important aspect because the way the marital
trust works, it’s going to go. Now this one was funded with 10 million bucks. So, you know, if he dies, and this is
like a husband and new wife, if he dies out of 25 million, I think like now it’s like 10 million is in joint name. So that’s
going to go to the new spouse directly. We’ve got still 5 million that are going directly to the kids. The other 10
million goes to a marital trust. So how that works is the marital trust receives a 10 million and then the new spouse
has access to the interest of that.
Speaker 3 – 20:17
So let’s just call it half a million dollars a year for the rest of her life. If she gets remarried, it’s still interest only if
she has new kids, still interest only. That principal then goes to his kids when she dies. And so that’s a. That’s a
really a good, I think a hybrid approach for several reasons. One, it’s going to feel it’s going to make both parties
provided for. I think then there still has to be communication and a relationship between the kids and the new
spouse if the person dies. So it just, it can be disastrous if you choose the wrong trustee or the parties don’t get
along.
Speaker 3 – 20:53
But I think from a trying to carry the Weight and trying to carry for all these different, you know, aspects and keep
your relationship with your kids, relationship with your new spouse all in place. That’s a, that’s a pretty good
strategy to cover the basis of everyone and make sure your money is just not leaking towards, you know, a new
spouse and new kids is not in your bloodline.
Meeting Title: 01 Financial Planning for Blended
Families (For tr…
Meeting created at: 19th Feb, 2026 – 12:37 PM
11 / 13
Speaker 1 – 21:15
You know, you brought up a really important word too, which is communication. Oftentimes we’ll get the question,
how do I communicate this? Do I want to communicate this? And generally speaking, that’s to kids from the
previous marriage. And oftentimes the breadwinner wants to do this plan to make sure second spouse or second
significant other is protected but doesn’t want to hurt the kids feelings or feel like something is being taken away
from the kids. And again, we’ve talked about this. There’s so many feelings and emotions and dynamic going on
here. But from our perspective as fiduciaries and trustees, we always side on the more communication, the better.
The more that everybody understands the plan. If and when, God forbid, that event happens and there is a death
and now the plan goes live, we don’t want any surprises.
Speaker 1 – 22:05
We don’t want anyone feeling neglected at any point in time. So, you know, the more that you can communicate the
plan and your intentions, we think the better.
Speaker 3 – 22:15
Having, you know, professional help during this conversation helps you avoid, I think, assuming, making
assumptions about either party. Oh, he doesn’t care about me because look how much money his kids are getting.
Assumptions will kill any chance of a plan, you know, working in real life. And then assumptions create
defensiveness create, you know, the chaos that nothing’s going to get executed.
Speaker 1 – 22:36
There’s not a one size fits all here plan either. So all the things that we talked about, whether it’s the reverse
budgeting that Ben went over, the insurance, the property, the trust, maybe you take some of, you know, these
aspects and put it into your plan, maybe use all of them. You don’t need to feel like, you know, one size fits all. You
can customize exactly what you want for your plan, your significant other, your kids, and your estate.
Speaker 3 – 23:01
Philosophically, there’s no one size fits all. You relieve a bunch of stress by creating financial independence. But
the more money after that could create more stress because of all the dynamics.
Speaker 1 – 23:10
And the challenge is we’re coming from a good place here. You just want to provide for everybody and you don’t
Meeting Title: 01 Financial Planning for Blended
Families (For tr…
Meeting created at: 19th Feb, 2026 – 12:37 PM
12 / 13
want anyone to feel like they’ve been, you know, disowned, neglected. The intentions here are Good. Which is why
we try and provide solutions that can help you get to where you want to go and that you feel good, that you can
communicate. Oftentimes we don’t communicate because we don’t feel good about what we have in place. If we
feel good about what we have in place, we should feel good about communicating it.
Speaker 3 – 23:38
No question. I would say in closing, you know, blended families without a financial plan are probably living a life
based out of, you know, some hidden financial stuff. They’re not sharing a lot of assumptions that are a lot of. A lot
of fear. A lot of fear day to day about, what if this happens? What if I lose my relationship with other kids? What if?
A good financial plan should allow you to kind of shift that to a life of, you know, you’re thinking abundantly, you
have joy back in your life, and, you know, you’re having transparent conversations and it lifts the. It elevates the
relationships up. But with that, it’s a really narrow sweet spot. You have to hit which one. One direction too far can
get pretty dicey pretty quickly.
Speaker 3 – 24:17
You know, you give too much to the kids and you could ruin their motivation. You give two. You feel like your kids
aren’t provided for, and now suddenly maybe they don’t want you in your life because you’re like, why is everything
going to your. Your new spouse? These. We see this day to day. And so there’s an artwork behind, you know,
navigating these tough conversations and getting a good financial plan to support, you know, all the what ifs that
could happen for sure. Perfect. Well, look forward to catching everyone next week and please reach out if you have
any questions.