Yours, Mine, and Ours: The Importance of Financial Planning for Blended Families

Kara Duckworth

CFP®, CDFA®, Managing Director of Client Experience


Blended families are the rule rather than the exception. We break down the financial and estate planning considerations today’s families need to know.  

Financial Planning for a Non-Traditional Family

Over the past 50 years, the concept of family has transformed to more than just a father and mother raising their biological or adopted children. In 1970, 67% of Americans aged 25 to 49 were living with their spouse and one or more children younger than 18. Over the past five decades, that number dropped to 37%.1 As the percentage of traditional families declines, nontraditional households are on the rise and include:

  • Blended families
  • Divorced, cohabitating, and same-sex couples
  • Single parents by choice
  • Families with adopted, foster, or stepchildren
  • Grandparents raising grandchildren
  • Children who care for aging parents

When families blend, so do their finances

Even though the numbers of blended (or non-traditional) families are increasing, navigating the financial landscape can be significantly more intricate than that of traditional families. That’s why effective financial planning becomes crucial to help meet expectations, ensure the smooth management of assets, protect the interests of family members, and preserve legacies.

Without careful planning and communication, finances can turn problematic when multiple sets of financial histories merge into one. Beyond the traditional conversations around budgeting and cash flow, there are other topics to consider. Updating your will and removing an ex-spouse as a decisionmaker, fiduciary, and as a beneficiary from retirement, bank and trust, and other accounts is vital. Did you know that if you have an existing will in place that leaves everything to your ex-spouse, your new spouse and stepchildren may not have any rights to your assets? Or if you and your spouse live in a home you placed in a trust with your ex-spouse, your current spouse could be left homeless upon your death?

Make sure important documents continue to meet your family’s needs and goals

Blended families can face several financial challenges. When children and assets from previous relationships are involved, it’s imperative to strike a balance between providing for the current spouse and family while safeguarding the inheritances of children from earlier marriages. An advisor with experience working with blended families can navigate the complexities by providing personalized strategies that help ensure all family members’ interests are considered, starting with updating these key elements of your financial plan:

1. Prenuptial agreement

If you’re remarrying, consider a prenuptial agreement. This legal contract determines how you and your spouse will own assets during the marriage (and how to divide them should the marriage end). This includes real estate, brokerage accounts, retirement funds, life insurance policies, and each person’s property rights should the marriage end in divorce. A prenuptial agreement also protects the inheritance rights of your children from previous relationships.

2. Insurance coverage

It may make sense to increase or extend life insurance coverage if there is a large age gap between spouses, one spouse isn’t working, or if young children are involved. Make sure you’ve named the proper beneficiaries to ensure they get the funds upon your passing. Additionally, long-term care insurance may be an important consideration if you are approaching retirement.

3. Last will and testament

When you and your spouse create wills, you specify how you want your assets to be distributed upon your death. A well-drafted will can ensure that both your current spouse and children from a previous marriage receive their intended shares. After a divorce, make sure to change any beneficiary designations, add or remove property transferred during the divorce, update your appointed executor, and designate a guardian for minor children and dependent adults.

4. Estate plan

Without a will or trust in place, your estate could get distributed according to default state laws. Generally, this equates to your spouse and children (when they reach the age of majority) receiving your assets. However, this only includes biological or legally adopted children, not stepchildren. If you want to leave assets to your stepchildren or other non-blood relatives, make sure your will and estate planning documents reflect these objectives.

5. Beneficiary designations

Review all your accounts – including IRAs, 401(k)s, and life insurance policies – and update as necessary. A divorce decree does not override a beneficiary designation. This means that if your divorce decree does not mention a particular account, the beneficiary associated with that account will continue to control it after your passing, even if the person is your ex-spouse.

6. Trusts

Different trusts can accomplish goals and distribute assets according to specific conditions and timelines. For instance, a qualified terminal interest property trust (QTIP) can provide income for a surviving spouse while passing along the rest of the assets to children or grandchildren. A generation-skipping trust (GST) is another type of trust designed to keep wealth in the family by bypassing children who have remarried. A trust can also provide for a family member with a disability.

7. Powers of attorney and medical directives

Preparing for incapacity is also important. A power of attorney (POA) gives someone you trust the right to make medical and financial decisions on your behalf in case of incapacity. Advanced medical directives include a medical POA, do-not-resuscitate orders, and a living will.

8. Don’t take a set-it-and-forget-it approach

Blended families can come with challenges, making financial planning even more complicated – underscoring the importance of working with financial professionals who can help ensure your family’s expectations are met. The estate strategists at Mercer Advisors have one goal: protecting your loved ones and everything you’ve worked for. If you’d like more information on estate planning, and all the ways Mercer Advisors can connect the dots on your financial plan, contact your wealth advisor.


1 Aragão, Carolina, Chris Baronavski, Shannon Greenwood, John Carlo Mandapat, and Kim Parker. “The Modern American Family.” Pew Research Center, 14 September 2023

2 Gentile, Ginger. “Blended but Not Broken: Step-Families.” Forbes, Forbes Magazine, 21 April 2021.

Mercer Advisors Inc. is a parent company of Mercer Global Advisors Inc. and is not involved with investment services. Mercer Global Advisors Inc. (“Mercer Advisors”) is registered as an investment advisor with the SEC. The firm only transacts business in states where it is properly registered or is excluded or exempted from registration requirements.

All expressions of opinion reflect the judgment of the author as of the date of publication and are subject to change. Some of the research and ratings shown in this presentation come from third parties that are not affiliated with Mercer Advisors. The information is believed to be accurate but is not guaranteed or warranted by Mercer Advisors. Content, research, tools, and stock or option symbols are for educational and illustrative purposes only and do not imply a recommendation or solicitation to buy or sell a particular security or to engage in any particular investment strategy. For financial planning advice specific to your circumstances, talk to a qualified professional at Mercer Advisors.

Mercer Advisors is not a law firm and does not provide legal advice to clients. All estate planning document preparation and other legal advice is provided through select third parties unrelated to Mercer Advisors.

Certified Financial Planner Board of Standards, Inc. (CFP Board) owns the CFP® certification mark, the CERTIFIED FINANCIAL PLANNER™ certification mark, and the CFP® certification mark (with plaque design) logo in the United States, which it authorizes use of by individuals who successfully complete CFP Board’s initial and ongoing certification requirements.

The CDFA® and Certified Divorce Financial Analyst marks are the property of the Institute for Divorce Financial Analysts, which reserve sole rights to their use, and are used by permission.

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