The modern family is anything but standardized. The ages of spouses may differ greatly. Blended families with children from previous marriages are common. There are often added responsibilities inside and outside the family home as well, such as caring for elderly parents. Family goals are more personalized and often don’t follow “typical” timelines.
As a result, financial planning strategies for Canadian families have become more diverse. Here are four considerations for non-traditional families.
Four Financial Planning Considerations for the Non-Nuclear Family
1. The Old Version of One-Size-Fits-All Planning Doesn’t Work
Financial planning advice from your parents likely sounds outdated, and that’s not just because of economic, technological, and ideological developments in the outside world; it’s also because the shape of families, their values, and their goals have shifted. These internal changes are just as important as the major ones that happen outside the family home. This is one reason why those time-proven financial proverbs your father-in-law depends on are proving to be less timeless than expected.
If there is one word to describe the modern family, it is “diverse.” Spouses with multiple past marriages, same-sex couples with children, common law situations, and people without plans to have children: All of these family arrangements would have been unusual in decades past. Now, this type of diversity is expected.
Alongside these changes, strategic financial planning has shifted. New options that are situation-dependent can prove to have major impacts on a financial plan, including tax breaks, child benefits, investment options, and more. The specifics of your family’s situation are important pillars for your financial plan.
2. Estate Planning is Essential
Estate planning is rarely straightforward, even in traditional nuclear families. However, less traditional families may have additional complexities or challenges when it comes to planning an estate.
In particular, blended families will want to make estate planning a priority, as there will be many additional questions to ask after someone passes. For example, estate plans in blended families often require trusts to be set up, or inheritances may need to be split in different ways between children from different marriages. Whatever the case is, thorough, scenario-based planning with a financial professional will ensure the desired outcomes are achieved, even in unusual circumstances.
3. Financial Steps Might Be Staggered in a Marriage
Couples who are of similar ages hit most stages of life at the same time. They retire together and age together, making future financial planning linear in shape. However, modern families often include couples with large gaps in the ages and stages of their lives. A husband may reach retirement age a decade before his wife, or vice versa. This requires a more dynamic financial plan and larger questions about each person’s goals, lifestyle, and needs.
A financial plan for a couple approaching retirement may include items like planning for the care of an aging spouse or for the likelihood that one spouse will pass away sooner than the other. It may also involve looking at early retirement options for a younger spouse, which could require more advanced retirement planning.
4. Understand Common-Law
Common-law status can impact many aspects of a financial plan. This is beneficial in some cases, but in others, there are risks associated with common-law status. For example, couples may be able to strategically transfer assets or tax credits to each other or open spousal RRSPs. However, they may also need to pool their income when applying for government or social assistance services, reducing the assistance they receive.
Common-law legislation varies from province to province. Splitting property can be very complex depending on that legislation, so it’s important to have a solid understanding of how the rules apply to your specific common-law situation. If you’re not sure whether you qualify as common-law, the best course of action is to ask your financial advisor. He or she will also advice you on common-law status entitlements.
The modern family undergoes many significant life changes, which is why it’s important to work with a financial advisor with a forward-thinking perspective. You can book a private consultation with Regan Schiller & Associates to learn about the first steps in creating a well-rounded financial plan that is customized to your unique family.
This is a general source of information only. It is not intended to provide personalized tax, legal or investment advice, and is not intended as a solicitation to purchase securities. Regan Schiller is solely responsible for its content. For more information on this topic or any other financial matter, please contact an IG Wealth Management Consultant.
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