By city

Infinite Banking in Vernon

A blended family has two obligations that can conflict: providing for a spouse and providing for children from an earlier relationship. A policy can solve that or make it much worse, depending on how it is set up.

The city between three lakes

Vernon sits at the north end of the Okanagan, between Kalamalka, Okanagan and Swan Lakes, with Silver Star above the valley and the ranchland of the Coldstream to the east. The O'Keefe Ranch on the north road has been there since 1867. The city draws people at two stages of life: those arriving for work in the valley economy, and those arriving later, often having lived somewhere else and sometimes having started again.

That second group is who this page is for, and they are poorly served by material that assumes one household, one spouse, one set of children.

Two obligations that can pull against each other

This is the page's central point. A person in a second marriage often intends two things at once: that a current spouse is provided for, and that children from a first relationship receive something. Those are both reasonable, and the ordinary tools handle them badly when they are combined carelessly.

The mechanism people rely on is the will, and the will is the weakest part of the arrangement. A life insurance policy pays the named beneficiary directly, and a will does not override a valid designation. That is the single most important sentence on this page. Property held jointly with a spouse generally passes to that spouse outside the estate too. So a household can leave a will dividing everything carefully and still have the great majority of its value pass elsewhere by designation and survivorship, with the will governing what little remains.

The result families discover too late is that children from a first marriage receive nothing, having been told for years that they would, and there is no realistic remedy after the fact.

Where insurance genuinely helps, and how

Used deliberately, a policy is one of the cleanest ways to handle this, because it moves a defined amount to a defined person without passing through the estate and without depending on anyone's cooperation after death.

Two structures are common and both need proper advice. A policy naming the children of the first relationship, so the estate itself can pass to the spouse without leaving the children out. Or a policy naming the spouse, freeing other assets to pass to the children. Which fits depends on the amounts, the ages and the tax position of each asset, and that is work for a lawyer and an accountant together rather than for a practitioner alone.

Two cautions. Review every designation on every policy after any separation, remarriage or birth, because an old designation naming a former spouse is enforceable and remarkably common. And be careful with an irrevocable designation: it protects the named person, which may be the point, but it also removes your ability to change your mind or to borrow against the contract.

What the strategy asks of a blended household

Premiums maintained without interruption for decades. Cash surrender value stays below cumulative premiums for many years, commonly more than a decade, so an early exit is a loss. Dividends are not guaranteed: they are declared annually by the insurer's board based on the participating account's experience, and the scale can be revised downward.

Where support obligations from a previous relationship exist, they come first, and any agreement requiring you to maintain insurance for a former spouse or children should be produced and read before a new contract is written. Practitioners cannot honour a term they have not seen.

British Columbia rules and where it does not fit

Insurance in British Columbia is regulated by the Insurance Council of British Columbia, and a professional here holds a Life Insurance Agent licence. Verify it in the Council's public register and ask how the person is paid. British Columbia has no title protection statute of the kind Ontario, Quebec and New Brunswick have enacted.

Nothing on this page is advice, and nothing on it is legal advice about estates or family obligations, which is exactly the area where general guidance does the most harm. No assessment has been made of anyone reading it, and the author is not a neutral party: he is licensed to sell the contracts this strategy uses and is paid a commission when one is placed. Bring your separation agreement and every existing policy to any meeting where beneficiaries are discussed.