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Legal and financial protection is particularly important for patchwork families in order to ensure the best possible protection for all family members. From insurance to inheritance law to cohabitation agreements: Here’s how to shape your coexistence as a patchwork family.
A patchwork family (also a stepfamily) is when two people form a new family together with their biological children from a previous relationship. This means that the children are not related to their own parent’s partner.
But even if the parents remarry, the children have no rights or obligations towards the new stepmother or stepfather. However, the stepparents are authorized and obligated to support their partner in exercising parental responsibility.
In a patchwork family, family members live together in a new constellation. The following points can contribute to a harmonious coexistence:
Coming together and living in a patchwork family has various advantages and disadvantages and positive as well as negative aspects:
A positive factor is that children in the patchwork family benefit from additional caregivers in their lives. They learn to adapt and be flexible, which can also help them in other areas of life. Merging two households can also ease the burden on a patchwork family’s budget. Developments in communication and conflict resolution skills also enrich coexistence in the long term, as well as new relationships that can develop between the children.
Of course, living together as a patchwork family brings with it certain challenges. The complex family structures can be confusing for children and lead to tensions. Different parenting styles and expectations require a lot of communication, which can be emotionally stressful and time-consuming. Children can also suffer from the separation of their biological parents and the new person at their mother’s or father’s side. They may feel emotionally torn when they think they have to choose between their parents and/or stepparents.
What’s more, it’s more difficult to protect your finances in a patchwork family. To ensure that the entire patchwork family is cared for in an emergency, insurance and retirement provision solutions must be reviewed and adjusted if necessary.
We recommend patchwork families to take out the standard types of insurance: Household contents, liability, supplementary health insurance, such as dental insurance, and for self-employed parents occupational disability insurance. As a supplement to a will, we recommend that patchwork families take out life insurance that makes it possible to determine who should benefit and to what extent in the event of death.
You can find more information on the insurance coverage for your patchwork family in the article “The right insurance for you and your family.”
We advise patchwork families to check their insurance policies for the respective insureds: Often, the common place of residence is decisive in determining who is insured where. A child from an earlier relationship whose main residence is with the other parent may have to be added to the policy or, ideally, is fully covered by the insurance policy of the other parent. As a safeguard, it is important to check whether each member of the patchwork family is covered by one of the existing policies or whether a supplementary policy needs to be taken out.
Many patchwork families are only aware of the options available in a will when it comes to beneficiaries. However, in the area of Pillars 2 and 3, there are also various provision options, of which many people are unaware. Each pension fund has its own regulations and therefore the arrangements for beneficiaries in the event of death also differ.
When households are merged, sums insured must be re-examined. This check serves as a safeguard to ensure that new items brought into the household of the patchwork family such as TVs, clothes, music systems, and cell phones are also insured. In any case, it is advisable to review the current situation and sums insured and amend them if necessary at least every three years.
Another sticking point is dental insurance for children. In this case, it is necessary to take out insurance at a young age, as at this point in time no pre-existing conditions or misalignments are usually known. Once dental insurance has been taken out, it should not be terminated and taken out again in the event of separation, otherwise there is a risk that (new) existing diseases or known dental misalignments will be considered pre-contractual.
In a patchwork family, legal and financial arrangements are particularly important to protect all family members. Topics such as provision for bad times, retirement provision, inheritance law, cohabitation agreements, and suitable insurance should be clearly regulated so that later conflicts can be avoided.
If a couple remains unmarried, an early clarification of retirement provision is recommended. The patchwork family should take into account various points for the three models OASI, OPA, and private retirement provision:
OASI/AHV (Pillar 1): Unmarried couples earn their OASI pension themselves and independently of the partnership. In the event of death, cohabiting couples are not entitled to a widow’s or widower’s pension, as is the case for married couples. Therefore, it should be ensured that end-to-end OASI contributions are made for both. As soon as one parent neglects their own provision in favor of staying at home and looking after children, the working parent should be supportive and take over the contributions. Any gaps caused by childcare are covered by OASI education credits.
OPA/BVG (Pillar 2): Unlike married couples, the pension fund assets of unmarried couples accumulated during their time together are not divided. Only in the event of death are OPA benefits possible for the surviving dependant; however, there is no legal entitlement. Occupational benefits institutions that award life partner’s pensions often link these to a specific cohabitation period or to care for joint children. To cover themselves for this situation, the partners should register the partnership with the pension fund at an early stage. At the same time, a cohabitation agreement can be drawn up, which can be used as evidence if necessary. Subject to certain conditions, many pension funds also pay a pension to surviving stepchildren and foster children. The couple must check with their own pension fund about the conditions governing mutual beneficiaries.
Pillar 3: In the case of tax-privileged, tied pension provision 3a, there is a legally prescribed order of inheritance, with biological children coming first for unmarried persons. Only then do the partner and other family members follow. To ensure clarity in the case of a patchwork family in the event of death, the order of beneficiaries and hence the order of succession for 3a capital should be defined by the pension provider during the lifetime of the insured. Retirement provision with the flexible Pillar 3b is particularly suitable for cohabiting couples. Whether savings, bank accounts, life insurance, bonds, money market investments, equities, securities funds, or property – all options can be used to protect one another financially, as the order of beneficiaries can be chosen freely, with the exception of the statutory compulsory portions. The nature and scope must be specified in the beneficiary clause, which must be communicated to the insurer in writing. It makes sense to set this out in a will.
Find out more in the article “Family: Protection against risk with Pillar 3” about how you as an unmarried couple in a patchwork family can take build up optimal protection in Pillar 3 and use the cohabitation checklist to ensure that no important points are forgotten.
For unmarried couples, it is advisable to have a cohabitation agreement. It should cover the following points:
In the event of death, it is advisable to draw up a will. In addition to the biological children, the life partner and, if available and desired, their children can be taken into account. Since biological children always receive a mandatory portion, only a small part of the assets can be bequeathed freely. However, it is possible for the biological children to agree to an inheritance (renunciation) agreement and thus to a division of the inheritance among all parties desired by the deceased. As mentioned above, it may be advisable to take out life insurance.
In the event of an accident or occupational disability of the partner, occupational disability insurance ensures that the family continues to be provided for according to the existing standard of living. As regards all other types of insurance, the existing policies should be checked and changed in line with the new circumstances in the event of separation or death.
Nadine Graf is a theme manager and writes texts for AXA on topics related to insurance and beyond.
