The marriage process, regardless of age, requires careful thought about a number of financial situations a couple will likely face. With financial disagreements being a leading cause of marital discourse, why not tackle certain issues ahead of time? This may include reaching out to your financial planner and other legal and tax advisers well in advance of the nuptials.
The starting point is to have a candid discussion with your fiancé about your overall finances.For example, how much debt is each of you bringing to the marriage? What about savings? How is your credit rating? The older you are, the more (good and bad) financial baggage you’re likely to bring to the partnership.
Next, from a savings standpoint, you should decide if you will be combining accounts or keeping them separate.Your financial adviser can walk you through what will be needed to combine checking, savings, and money market accounts. He or she can also advise you about adding or changing beneficiaries on your individual retirement accounts and current or former employer retirement plans.
Even if you decide to maintain separate accounts, it may be helpful to have at least one jointly titled account to pay for shared expenses, such as the mortgage or car payments, rent, household expenses, and insurance premiums. This account is meant strictly for household needs, and it allows you both to keep track of how you are spending money.
A joint account can also help avoid complications in the event one spouse dies. When a spouse or common law partner dies and there are separate accounts, the survivor will be excluded from the other separate account if the estate goes into probate. That could take months and add additional expenses due to court and attorney fees.
If you are both employed, you should take time to review and coordinate your employee benefits. You might save money by eliminating duplicate health care coverage, for example. This process also allows you to identify, and then make any changes to, the beneficiary designations on retirement plans and insurance policies held through your employers.
Next, sit down and identify financial goals as a couple. Start by creating an annual budget, as well as a contingency plan in case a spouse gets laid off or becomes disabled. Make sure you have an emergency cash reserve equal to several months of income. Designate who will be responsible for paying the bills and keeping you on budget. Also look beyond your current financial situation. For example, discuss what you envision your retirement will look like and whether current retirement account contributions are sufficient to achieve your long-term goals.
People who have been previously married may bring additional financial issues to the table, especially if they have children or are required to pay alimony, child support, or insurance premiums under the terms of a divorce settlement agreement. Also consider whether your remarriage will nullify any entitlements to assets from a former spouse. For example, getting remarried could invalidate your right to claim an inheritance or other financial interest. Meet with your advisers to address these issues whenever you are considering blending your finances.
Remember that whether it’s your first time down the aisle or not, marriage is a celebration. Don’t let all of the financial and administrative details that go along with your special day spoil it. Meet with your financial, tax, and legal advisers to establish a budget and tackle other financial and legal issues head-on. A little planning on the front end can alleviate stress well beyond the wedding day.
Jeff Witz, CFP® welcomes readers’ questions. He can be reached at 800-883-8555 or email@example.com.
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