You’ve found the love of your life and the wedding date is approaching. On top of everything else you have to plan and do, there are a number of financial decisions for couples that you’ll have to make as you consider how you’ll be merging your finances.
The first step here is the most important. Have a long conversation about your different financial habits, and the debt and property you each have now. Clarify how you each expect your finances to work after marriage and make sure you’re on the same page (or figure out what compromises you need to make to get there). This will probably require more than one conversation and if you realize you’re on very different pages to start, it may be worth talking to a counselor to sort things out.
Here are some of the main financial decisions couples should consider:
There are a few possible scenarios. If you’re both renters and you aim to stay that way, you don’t have much to worry about. But if you’ll be buying a home together or moving into one a partner already owns, there are issues to consider.
The simplest solution is to treat the house as shared ownership. If you buy a house together, both your names will be on the title and the process shouldn’t be that complicated. If you’ll be sharing in equal ownership of a house one of you already owns, then you should talk to a real estate lawyer about adding your spouse to the deed. They can talk you through your options (namely joint tenancy versus tenancy in common) and help you navigate the paperwork required to make the change.
If you’re not sure about sharing ownership of a real estate investment you’ve already been paying into, then you should definitely talk to a lawyer. Keep in mind, if you want to avoid sharing ownership in the home you live in together, that puts your partner in a difficult position. If they’ll be paying rent to you, their spouse, without getting a share in the property ownership, it might be hard ever seeing your shared abode as home. But if it’s important to you to maintain ownership, then the steps you’ll need to take will be different based on whether you’re in a common law or community property state and a lawyer will be able to walk you through what you need to know.
And don’t forget to consider your homeowner’s insurance policy. Neil Richardson, licensed insurance agent at The Zebra, recommends newly married couples reevaluate the amount of coverage they need for their combined personal property.
“It’s also a good idea to create an up-to-date inventory or video documentation of all personal property. This can serve as proof to show your insurance company in the event of a claim. Increasing the personal property coverage limit does no good if you don’t have proof of the additional items at the time of a claim, so be proactive and update it as often as necessary.”
For any car either bought in full or paid for in part during the marriage, your spouse could be considered a partial owner of the car automatically depending on the laws of your state (this the same common law versus community property issue mentioned above). In that case, you may not have to do anything special to add them to the title if you want them to be a co-owner, but you will have to talk to a lawyer if you want the keep the car ownership specific to only one of you.
If you want to make sure that your spouse will be able to keep a car you bought before marriage in the event of your death (sorry, getting dark here for a second), then you can add their name to the title after marriage.
If you’re not as concerned about the transfer of property, but simply know that both of you will be using the car, then what’s most important is to make sure you either add your spouse to your car insurance policy or, even better, get a joint policy together.
According to Neil, this can provide bonus financial benefits.
“Married people generally pay less than their single counterparts, and many companies offer discounts for insuring multiple vehicles on the same policy, so combining coverage can lead to much lower rates for both spouses,” he says. “Each person should contact their respective insurance providers and request a quote to add the other spouse to their policy, and compare new rates altogether to find the best coverage, service, and pricing available.”
Bank Accounts and Credit Cards
One of the biggest financial decisions for couples is whether or not to open a joint bank account or have a joint credit card. In most cases it’s a good idea to have at least one joint account. As a married couple, you’ll have shared expenses and a joint account or credit card will make dealing with those easier.
You have a few different options here based on how fully you want to merge your finances:
- Move all your money into a joint account. If you’re prepared to join your finances completely, you can open a joint account and transfer all of the money from your personal accounts into it.
- Keep your personal accounts, but open an additional joint one. The main reason to keep some of your financial accounts separate is if you have different spending habits and want to be able to better manage your personal expenses separately. Perhaps you each have a personal fun allowance or want to be able to buy each other gifts without the money coming from a joint account. If you’re more comfortable keeping some of your finances separate, but want to make it easier to handle shared expenses, you can open a new account together and transfer an agreed upon amount from your personal accounts each month to use for things like bills and groceries.
- Keep separate bank accounts, and use a joint credit card for expenses. If you’re not comfortable merging your money into one bank account, this can keep your finances a little more separated, while allowing for an easy way to cover shared expenses. Of course, it still requires trusting your partner to make reasonable spending choices in order not to put your credit at risk.
Investments and Retirement Plans
Retirement accounts are one type of financial holding that can’t be joined in marriage. They’re legally established to be for individuals, so your IRA, 401k, or any other employer-sponsored plan will remain in your name. You can still do your retirement planning together, with the intention of the money in either partner’s accounts being accessible to the other, but the accounts themselves will remain solely in one person’s name.
Non-retirement investments are different. Other types of investment accounts, CDs, and money markets can go under both your names. If you want to start a joint investment account or add your spouse to a non-retirement account you already have, talk first to each other about how ongoing contributions to the account from each of you will work. Once you’re on the same page, meet with your investment advisor to complete the necessary paperwork.
You’ve got a few more steps you need to take before you’re done:
- Draw up wills together. A lot of people tend to put off creating a will until a big life event makes them realize they need it, and marriage definitely counts as a good reason to get it done. Talk to a lawyer about how you want your spouse included in your will and have them either update or create a new will for you.
- Discuss life insurance. Before your marriage, life insurance may have seemed unnecessary. Now you have someone else’s well being to think about. Discuss what would happen to the other in the event that one of you died (not a fun conversation, but important), and decide if life insurance is worth the investment to protect each other financially.
- Consider a prenuptial agreement. No one wants to think about the possibility of divorce before they get married, but having a conversation now about which assets and savings would belong to who in the event of a divorce could potentially save you a lot of trouble later. If either or both of you have property or savings that you want to protect, talk now about whether or not a prenuptial agreement is right for you.
Navigating money issues is one of the hardest parts of a new marriage. Early and open communication about your finances early on can make a huge difference and make your union that much stronger.