Financial Planning For Your Family, When You Are In a Second Relationship

Here at Sanlam we recognise that life isn’t always a straight forward road and when a relationship or marriage comes to an end, there is often a lot to sort out.

This becomes ever more complicated if a second marriage with step children from both sides of the family and half siblings in the middle are involved. This can make conventional financial and estate planning a real headache.

The straightforward approach to ‘who gets what’ on death and how dependent children are financially cared for becomes more complicated. Who provides financially or saves what for which child and how assets are split can all require planning to ensure those who need it are cared for and to avoid family disputes.

Where to begin

The most important step is to start. This may sound obvious, but often those who have more complicated family arrangements are the ones less likely to have good planning in place.

Protection

If you pay maintenance income for children from a previous relationship, then protecting this arrangement financially against your illness or death needs to be considered alongside other life assurances you may have. You can have more than one policy with different beneficiaries, and each policy can be put in trust for a child, a useful way of controlling who benefits.

If you receive an income from an ex-partner and rely on this, then you may be able to take out an insurance policy on your ex-partners life. It’s not as unusual as it sounds; all life assurance policies require there to be an ‘insurable interest’, for example, where one party will suffer financially following the death of the person whose life is insured. A good example would be maintenance payments received for shared children.

Write a will

There can also be an inheritance issue to carefully consider. If you have remarried, then unless you have written a Will, your current spouse is likely to inherit the bulk of your wealth and assets and therefore in turn their children, and / or your children from this relationship.

Many people don’t feel comfortable with this arrangement and feel concerned that children from a previous relationship are excluded, particularly when there is property and considerable wealth involved. This can be corrected by writing a will or arranging a life insurance policy to cover this inheritance disparity.

Saving and investing for a child

When there are children from more than one relationship, being fair and getting this right is an almost impossible task and can cause considerable heartache. Any financial investment you make for them as children can often have a big impact later on in their life.

There are saving accounts which are specifically designed for children, such as a Child Trust Fund or a Junior ISA. Your child can only have one of these type of accounts and there are limits as to how much you can invest into these accounts each year, so make sure that you have a conversation with the child’s other parent or guardian before opening.

If you would like help in arranging your families protection policies, or you would like advice on how to financially plan more effectively, emails letstalk@sanlam.co.uk

This article is for information purposes and should not be treated as advice. Individual circumstances should always be considered prior to purchasing any financial products. For further information please contact your Wealth Planner.

Sanlam is a trading name of Sanlam Wealth Planning UK Ltd (Reg. in England 3879955) and English Mutual Ltd (Reg. in England 6685913). English Mutual Ltd is an appointed representative of Sanlam Wealth Planning UK Ltd which is authorised and regulated by the Financial Conduct Authority.