Yours, Mine, and Ours: Marriage and Personal Finances

Marriage is the blending of two lives. You share living space, life goals, and maybe a name, but there is more than meets the eye when it comes to your finances. If you, or someone you know, are recently married or planning a future wedding, this quick primer on finances may be very helpful.

Asset Ownership

Don’t think that once you and your spouse say “I Do,” your names will magically appear side-by-side as co-owners of your assets. This does not happen. You have control over what remains individually owned and what you own together.

• Bank Accounts. Checking and savings accounts remain individually owned until you take the necessary steps to add an authorized user. An authorized user has unrestricted access to the money. If you desire to add your spouse to an existing account, it will likely 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, such as 401(k)s and IRAs, can only have one living owner at a time. When the original owner passes away, the named beneficiary inherits the account. If you would like your spouse to receive your retirement funds, be sure to update the beneficiary designations after the wedding. On the other hand, more than one individual can own a brokerage account. If the current owner wants to add the spouse to the account, fill out paperwork with the custodian.
  
  
• Real Estate. Real estate ownership is recorded through the property’s 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 owned jointly, both owners must sign off on any property refinancing or selling. It’s also important to understand how the titling impacts distribution at the death of an owner. If a home is titled jointly, the surviving owner becomes the sole owner at the first death. On the flip side, if the home is titled individually, ownership is dictated through the deceased’s Last Will.
  
  
• Debt. Debt owed by someone before marriage will remain in their name, meaning the partner is not liable for their spouse’s debts. However, if the spouse is added as an account holder of a joint credit card, they are legally on the hook for the balance. Mortgages can be tricky. If you wish to add your spouse to a pre-existing mortgage, your lender will likely ask you to refinance. Think through the pros and cons of this decision before signing the dotted line.
  
  

Have “The Conversation”

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

One easy way to open up about the personal aspect 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 conversation starter is to share stories about your family’s finances growing up. How has your upbringing influenced your financial habits? Lastly, be sure to discuss spending habits. Who is the bigger spender? Who is the bigger saver? Do you care about buying name-brand items, or will off-brand suffice?

Budgeting

When two lives come together, so do two sets of bills. It is important to determine who pays what and how much. Couples often question whether to have joint or individual accounts or a combination of the two. Creating a household 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 for one-half of shared expenses. The 50/50 method works well when you have similar incomes. If there is a disparity in pay, you may want to contribute a pro-rata amount based on income. This is an equitable approach that eases the burden of the lower earner. The last option is to “go Dutch” and keep bills separate. This will not work for shared expenses, such as the mortgage and utilities, but it helps couples with different lifestyle expenses 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 status and hash out a plan together. You don’t have to walk it alone. Consider hiring a financial planner for unbiased guidance.

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