Yours, Mine and Ours: Marriage and Personal Finance

Marriage is the union of two lives. You share living space, life goals, and maybe a name, but there’s more than meets the eye when it comes to your finances. If you or someone you know is recently married or planning an upcoming wedding, this short primer on finances can be very helpful.

Asset Ownership

Don’t think that once you and your spouse say “I do,” your names will magically appear next to each other as co-owners of your assets. This does not happen. You have control over what remains individually owned and what you jointly own.

Bank accounts: Checking and savings accounts remain individually owned until you take steps to add an authorized user. An authorized user has unlimited access to money. If you want to add your spouse to an existing account, it will probably require a trip to the bank, along with some paperwork. Be sure to bring proper identification! The same can be done with credit cards. More on that later.

Investments: Retirement accounts, like 401(k)s and IRAs, can only have one living owner at a time. When the original owner dies, the designated beneficiary inherits the account. If you want your spouse to receive your retirement funds, be sure to update the beneficiary designations after the wedding. On the other hand, more than one person can have a brokerage account. If the current owner wants to add the spouse to the account, please complete the paperwork with the custodian.

Real estate: Real estate is registered through the property title. You can add your spouse to the title by filing a quitclaim deed at your County Recorder’s Office. Remember, once a home is jointly owned, both owners must approve any refinancing or sale of the property. It is also important to understand how titling impacts distribution upon the death of an owner. If a home is jointly titled, the surviving owner becomes the sole owner on the first death. On the other hand, if the house is individually titled, ownership is dictated through the Last Will of the deceased.

Debt: Someone’s debt before the marriage will remain in their name, which means the couple is not responsible for their spouse’s debts. However, if the spouse is added as a joint credit card account holder, they are legally obligated for the balance. Mortgages can be complicated. If you want to add your spouse to a pre-existing mortgage, your lender will probably ask you to refinance. Think about the pros and cons of this decision before you sign the dotted line.

Having “the talk”

When the time is right, sit down with your partner and talk about money. Discuss quantitative items, such as salary, expenses, assets, debt, and employee benefits. Be sure to talk about the personal side as well. After all, they are two people with two different life experiences and attitudes about money.

An easy way to open up about the personal side of money is to share your financial goals. Are they aligned with your partner’s? It’s perfectly fine to have different goals. The importance lies in awareness. Another topic of conversation is sharing stories about your family’s finances growing up. How has your education influenced your financial habits? Lastly, be sure to discuss spending habits. Who is the biggest spender? Who is the biggest saver? Do you mind buying branded items, or will no brand suffice?

budget

When two lives come together, so do two sets of bills. It is important to determine who pays what and how much. Couples often wonder if they should have joint or individual accounts or a combination of the two. Creating a family budget should help you come to that conclusion.

There are several budgeting approaches to consider, and this paragraph details three. The first method is to pay half of the cost sharing. The 50/50 method works well when you have similar income. If there is a pay disparity, you may want to contribute a prorated amount based on income. This is an equitable approach that eases the burden on lower income earners. The last option is to “go Dutch” and keep the bills separate. This won’t work for shared expenses like mortgage and utilities, but it helps couples with different lifestyle spending or attitudes about saving.

conclusion

There is no right or wrong way to manage personal finances as a couple. Be open and honest about your condition and make a plan together. You don’t have to walk alone. Consider hiring a financial planner for unbiased guidance.

Kate Arndt is a financial planner at Bedel Financial Consulting Inc., a wealth management firm located in Indianapolis. For more information, visit her website at www.bedelfinancial.com or email Kate at karndt@bedelfinancial.com.

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