Financial Red Flags and Scams to Watch Out For
In addition to creating a solid plan, a key part of senior financial planning is knowing what to avoid. In the context of blended families, certain mistakes and bad advice can be particularly destructive.
Red Flag 1: The “Sweetheart Will” Mistake
This is perhaps the most common and devastating pitfall. A “sweetheart will” is where you and your spouse create simple wills leaving everything to each other. You have a verbal agreement that whichever of you survives will then divide the remaining combined estate fairly among all the children from both sides. It sounds simple and trusting. It is a terrible idea.
The surviving spouse has no legal obligation to honor that verbal promise. After you’re gone, life happens. The survivor could remarry, have health issues that drain the estate, or be influenced by their own children to write a new will that excludes your kids entirely. Once you pass away and they inherit the assets, they have complete control. The only way to guarantee your children receive their inheritance is to build that guarantee into a legal structure like a trust.
Red Flag 2: Overlooking the Impact of an Old Prenup
If you or your spouse had a prenuptial agreement from a previous marriage, it could have lingering effects. More importantly, if you have significant separate assets coming into your current marriage, a postnuptial agreement can be a wise decision. It’s a contract signed after marriage that clarifies how assets would be divided in case of divorce or death. It can preemptively waive certain spousal inheritance rights defined by state law, giving you more freedom to direct your separate property to your own children through your estate plan.
Red Flag 3: The “One-Size-Fits-All” Advisor
Be cautious of any advisor who immediately pushes a complex and expensive product without first deeply understanding your family dynamics and goals. Some advisors, motivated by high commissions, might recommend unnecessary irrevocable trusts or complex annuities that limit your flexibility. A good advisor or attorney will listen first. They will ask detailed questions about your assets, your spouse, your children, and your stepchildren. Your plan should be customized to you. If you feel pressured or confused, that’s a major red flag. Always seek advice from an experienced estate planning attorney or a fee-only Certified Financial Planner (CFP) who specializes in these matters. For consumer protection, you can consult resources from the Consumer Financial Protection Bureau (CFPB) and the FTC.
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