In 1960, 73% of households in the United States were married couples with children. Fast forward to 2014, that number has decreased to 46%1. This means that today, over half the households in the United States do not fall under what was once known as the “traditional family.” So what makes up 54% of households? It is made up of two parents that are cohabitating together, parents that are remarried and single parents.
If you are a part of a “nontraditional” family, then your financial planning may also be “nontraditional.” Here are some things to consider if you find yourself to be within the new majority.
IF YOU ARE IN YOUR SECOND MARRIAGE
As of 2013, 40% of marriages involved at least one of the spouse’s remarrying1
You also have to think about Social Security benefits. By remarrying, you are no longer entitled to 50% of your first spouse’s benefit, and you will now be entitled to 50% of your new spouse’s benefit, but depending on earnings, this could have a negative impact on what benefits you may receive from Social Security. Please note if you do qualify for
With remarriage, you are still getting all the advantages of other married couples
IF YOU COHABITATE WITHOUT MARRIAGE
7% of households are made up of two people cohabitating together1. Although this means getting to keep all your assets separate, you could potentially run into some problems. For example, if you pass away without a trust or will in place, then your assets will have to go through probate court in order to be passed onto your heirs. Generally, they go to “next of kin” (which depending on the state could be your children, parents or siblings) and not given to your partner regardless of how long you have been together.
You also have to think about other issues such as how you are not eligible for each other’s Social Security benefits, or how you are not able to be on a family health insurance plan. You are also taxed individually, which may put each of you in a higher tax bracket. When inheriting IRAs, you cannot treat them as your own. You are also subject to the $14,000 annual gifting limitations.
SINGLE PARENT HOUSEHOLDS
26% of households are single parents1. Some of these situations
Single Parent: Even when not married, it is still important to have the proper estate plan in place. If you have children that are minors, you want to make sure you have a designated guardian for your child if something were to happen to you as well as a trust spelling out how you would like your child to receive assets. You also want to ensure the proper beneficiary designation for your retirement accounts, as
Divorce: After getting divorced it is important to update your estate plan whether that is wills, trusts, or beneficiary designations. If kids are involved, it is important to decide which parent will claim them as a dependent on their tax return. Claiming your child(ren) as a dependent gives you an extra deduction, and you can file your taxes as “Head of Household,” which can help lower your taxes even more. Some other planning items include giving/receiving spousal support or child support as this may affect taxes. Joint debts must be settled or refinanced into one name to avoid having negative impacts
Widowed: If your spouse passes away, it is important to update your estate
As family dynamics change, so will your life plans. As this is just a brief overview on things you need to think about if you are in this situation, working with a financial advisor, attorney, and tax professional will help to ensure you have the right strategy in place.
The opinions voiced in this material are for general information only and are not intended to be a substitute for specific individualized tax or legal advice. I suggest that you discuss your specific situation with a qualified tax or legal advisor.
 Pew Research Center: http://www.pewsocialtrends.org/2015/12/17/1-the-american-family-today/