Today’s families come in all shapes and sizes—single parents, blended families, same-sex couples, and more—each with a unique set of needs. These families require a carefully crafted plan to protect their financial assets in the future.
Inspired by relationships in both my personal and professional life, I co-authored the book Master Your Financial Success. In it, I wrote a chapter on financial planning for non-traditional families. Our mission is to educate and act on behalf of those seeking guidance tailored to their unique family situations.
The growth of the non-traditional family
Non-traditional families are becoming more of a norm. According to data from the Pew Research Center, married-couple households (Americans ages 25 to 49 with kids) now account for less than half of all American households at 37% in 2021, a sharp decline from 67% in 1970.
Today’s modern families encompass the following groups:
- Single parents
- Blended families (as a result of a second marriage)
- Unmarried couples with or without children
- Individuals with multiple previous marriages
- LBGTQ+ partnerships
- Traditional married families with or without children
These evolving family units each have their own set of financial needs and the first step in navigating the future is to start to define their family and financial goals.
Important questions for couples
Be open to discussions early on in your relationship and understand that your financial perspectives may be different. You will need to work together on a joint plan. It’s helpful to answer these three key questions to become more clear about your financial goals and how you will work together:
- What are your feelings about money and debt?
- What type of lifestyle do you want today and in retirement?
- Will you be sharing any debts or assets brought into your relationship?
When combining finances, note that unmarried couples have fewer legal protections if the relationship ends or one dies. A cohabitation agreement, similar to a prenuptial agreement for married couples, is a contract that states how you plan to share assets, debts, and any property you have now or in the future. This is just one example of an option to protect your assets.
Build your team of professionals
The best place to start is to create a plan for how you will deal with a variety of financial situations, including bonuses, inheritances, job loss, and big stock market drops. You will want to assemble your team of professionals which should include a financial planner, attorney, and an accountant. These specialists will help you uncover financial considerations that you may not have thought of and help you respond to surprises along the way. Your team can help you set up an action plan for your unique situation in an integrated, effective manner.
Protect your assets for the long term
Titling assets
One crucial step in protecting your assets is to title them correctly. Common options for titling will include owning assets individually, owning them jointly with rights of survivorship, or jointly as tenants in common.
Naming beneficiaries
Naming beneficiaries is the least expensive way to designate who is to receive a certain asset; actually it is free. Beneficiary designations can help the named asset avoid probate, meaning that assets like retirement accounts, life insurance, and annuities will go directly to named individuals upon death. This step is especially important for single parents and those in second marriages to ensure assets are distributed to children or chosen individuals as intended.
For parents with minor children, consider naming a trust as the contingent beneficiary. This way, a trusted individual who you have pre-selected can manage the assets on behalf of the children until they reach adulthood.
Social Security and corporate benefits
Unmarried couples also face challenges when it comes to Social Security. While married couples have access to spousal and survivor benefits, unmarried partners do not. Solutions such as qualifying employment for stay-at-home partners can help them build their own Social Security benefits. Additionally, partners with previous marriages lasting ten years or more may qualify for Social Security benefits based on their ex-spouse's earnings.
Similarly, corporate benefits such as health coverage and pension options vary by employer and state of residence. Some companies no longer offer domestic partner benefits. Life insurance is a potential safeguard for unmarried partners.
Decisions on debt
Unmarried couples aren’t automatically liable for each other’s debts. However, co-signing on loans or credit cards means both partners share full liability. If one partner defaults, the other may be held responsible for the entire balance. Maintaining separate credit while deciding which debts to share can help safeguard both partners’ financial health.
Financial planning for non-traditional families requires careful consideration and proactive planning. Our Kensington Wealth Partners team is here to answer any questions you may have. If you’d like help in this area, please contact us to schedule a time to visit.
Paula Tarpey is a strong leader in the financial community. She is a partner and director of wealth management at Kensington Wealth Partners. Paula is a published author and is often requested to speak to national and local audiences on financial planning topics. Most importantly, Paula is passionate about serving her clients and community and is proactive in helping her clients take action to achieve their goals.
Securities offered through Osaic Wealth, Inc. member FINRA/SIPC. Osaic Wealth is separately owned and other entities and/or marketing names, products or services referenced here are independent of Osaic Wealth.