Investments, blended families and making it all work

By Tim Suffish CFA, CPA Vice President, St. Germain Investments Love is great and is often forever. but the reality of life is that marriage often ends in divorce. In fact, in today's world this almost seems an old-fashioned idea, too. Given current trends, love often never even leads to marriage! Planning for today's family ties Changing family situations and the increase in life expectancy have been pushing the needle for financial advisors as it pertains to investing and planning for the future, given increasingly complex situations. Life today presents many situations like cohabitation and "second families" that "old" financial planning never accounted for! Example: You have children from family one and family two. You want to make sure they are all properly and fairly taken care of. After decades of work and several jobs, you have three IRAs, two 401ks, two insurance policies, one brokerage account, and two houses. Solution: The first step should always be to keep it simple. There is no need to maintain multiple retirement accounts. IRAs and 401ks can be consolidated into one single IRA or your current employer's 401k. Diversification is the golden rule when it comes to investing, but remember that you should diversify the investments, not the investment provider. Check your plan when love changes The second step is the most important. Keep in mind that many financial accounts (IRA, 401k, insurance policies, TOD accounts) have stated beneficiaries, and that upon your death the beneficiaries will receive their share as directed. These accounts do not pass under your will. As your family situation changes, this is a very important item to keep current. If you opened an IRA a number years ago and have had it on overdrive since then, there is a chance that the beneficiaries you named then are not consistent with who you would want now. If you are already in the habit of reviewing your will on a periodic basis, add to the routine a review of beneficiaries to make sure the two are working in concert. Example #2: You enter into a second marriage late in life, and there are no kids. This situation is not necessarily any easier than the first; you want to provide for the lifetime of the (surviving) spouse, but then fairly divide funds among the kids from your previous marriages. This requires considerable discussion between the couple, in consultation with a planner and possibly an attorney as trusts may be needed. Some may think that trusts are only for the "rich," but this is not the case. Trusts are the perfect way to solve the above stated problem, and in effect control the distribution of your assets "from the grave". Prepare to think ahead, adjust Bottom line: Today's family situations mean investors need to talk, and plan. Discuss scenarios that may derail your plan, and revise to deal with contingencies. Almost anything that you want to accomplish can be done with proper planning. If your situation is not "plain vanilla," begin by asking questions of your financial advisor to verify that your assets are titled appropriately. And, as your age and/or situation changes, be sure to review the plan on a periodic basis. Column provided to PRIME by:St. Germain Investment Management; 1500 Main Street, Springfield, MA; Phone is 413-733-5111 or 1-800443-7624; web site: www.dgstgermain.com