Marital status changed? So should your financial plans
From single to married, married to divorced, or married to widowed – any shift in marital status brings with it a number of significant changes in your lifestyle. But you’ll have to adjust your financial planning too. You may require advice on your investment accounts, insurance program, tax planning, family trusts and estate planning.
Certain financial planning changes are common to almost any change in marital status. For example, you will need to update your will, as well as any beneficiaries on your insurance policy, pension plan and registered plan. However, each type of marital status change also calls for unique planning that we can help you with.
These days, getting married often means pooling two incomes, offering you new financial opportunities, such as buying property. However, if there is only one primary income earner, that person may require health and life insurance to protect the standard of living of the other spouse.
Another key change involves tax planning. You can save on current and future taxes through income-splitting strategies such as RRSPs, non-registered investments or even by hiring your spouse. Also, when filing income tax returns, you can combine certain tax credits for one spouse to claim, and transfer unused credits to the other.
If you are dealing with divorce, you will likely encounter a financial situation you have never faced before. You may need to manage the consequences of paying or receiving a lump sum settlement, or – if children are involved – determine if the spouse with primary custody can remain in the family home from a financially perspective.
For a single parent, disability insurance and critical illness insurance are crucial. How else will you support your children if an illness or injury prevents you from working?
If you are single without children, part of your challenge may be psychological. Some single people pay less attention to financial planning because they feel they have fewer financial obligations. But in fact, you have fewer opportunities and assurances – no tax saving through income splitting, no partner to share financial responsibilities. You need a comprehensive financial plan, including an estate plan.
Remarried with a blended family
When it comes to blended families and wealth management issues, having good communication and determining what is fair are important – whether you are equalizing education savings or updating insurance coverage.
One area where you may require a new financial planning solution is estate planning. Take the case of an individual who wants to provide for the current spouse but also wants to leave a legacy for his children from the first marriage. A common solution is a spousal trust. After the individual’s death, the spouse receives income for life, and when the spouse passes away, the children receive assets of the trust.
A surviving spouse is often faced with the new and sudden situation of being solely responsible for generating income, paying expenses and even possibly receiving a large sum of money from investment funds, life insurance proceeds, or both. We can offer advice and guidance to ease the stress. If you need to reallocate funds to suit your personality and risk tolerance for instance, we can help you sell equities to invest in low-risk fixed income vehicles or choose an annuity.
If you have a change in marital status or foresee a change, speak with an Assante advisor. Our expertise in financial planning will ease your transition and guide you through your new life stage.