Here’s what modern families should consider before merging finances.

If your relationship has recently shifted from casual dating to exclusivity, you might wonder what this means for your future. For some, it could lead to tying the knot. For others, it might only involve a wedding of financial accounts. Either way, costs related to children from earlier relationships or the care of elderly parents could unexpectedly disrupt the celebration. But those aren’t the only financial challenges blended families face.

Before wedding bells ring or two households become one, transparent conversations should take place — chief among them being whether and how to combine finances. Adam Teel, private client advisor for Commerce Trust, has seen first-hand how honest, upfront discussions might lead to less conflict and greater relationship harmony.

Blended families can be a dream come true. They can provide a larger, more diverse support system for children and offer an opportunity to build new family traditions. However, ignoring the financial implications of bringing biological and stepchildren under one roof — even if only part-time, could become a nightmare. This became painfully obvious during a meeting Teel had with an engaged couple who both had children from a previous relationship.

“When asked who should inherit his assets, the future husband said, ‘My kids.’ Did he mean his biological children, or also his soon-to-be stepchildren?” recalls Teel. “This started an argument because he said, ‘I just want to give it to my kids.’ His fiancé was not happy. It took about six months before they resolved this issue.”

The care for elderly family members should also be discussed with your partner. Providing financial support could help a loved one maintain their quality of life while giving you more time to create lasting memories. Whether an aging parent will eventually live with you or in an assisted living community, considering how your budget might be impacted by such events is worth exploring now.

Some families incorrectly assume the government will pay 100% of these expenses. “Even if it’s not full-time care, I’ve seen budgets unravel because of a failure to plan for doctor visits, medication, and other age-related health care expenses of their partner’s parents,” Teel says.

He adds that being open about debts, assets, and spending habits is crucial to a successful financial merger. “Some couples avoid the financial talk and are surprised when they discover their partner has a $5,000 high-interest rate loan or hefty child support payments.” Hidden financial obligations come to light eventually.

“I always tell people a joint bank account can be great for paying bills, but it can be horrible if you open an account with someone with a history of poor money management,” Teel says. “For instance, if one partner has a ton of past due debt, a creditor could call the loan due and end up draining the account through rights in a contract or through a lawsuit.”

Couples who make a point to talk about finances early and often might improve overall communication, deepen trust, and reduce future money-related conflicts.

Teel suggests specific questions to start the conversation:

• What’s your credit score?
• What federal filing status will we use when filing federal income tax returns?
• If one of us becomes disabled or gets laid off, will you be willing to support the household financially?
• Do we have enough money to support kids from our past relationships plus the cost of raising any kids we want to have?
• Should we have separate or joint bank accounts?
• Since our incomes aren’t equal, how will we split the bills?
• How do you want to spend our discretionary income?

Early in a relationship, the focus is often on personal compatibility. But, creating a shared financial vision might be just as important. As you prepare to blend families and finances, seek the input of a qualified advisor and tax or estate attorney who can ensure each person’s interests are protected.

“Prepare for the worst, but hope for the best,” says Teel.

Also See:

• For LGBTQIA+ people wanting to start a family, it's important to be financially prepared.
• What happens to your debt when you die?