Article
Congratulations! Either you are considering getting married, are recently engaged, or are newly married; you aren’t alone. In 2014, the CDC reported 2.14 million marriages in the United States, which correlates to 1.3% of the population. The obvious goal for a married couple is to experience a flourishing marriage, including financial success. The following thinking points are designed to initiate thoughtful life discussions (along with pre-marriage and post-marriage considerations) to launch both of you into a prosperous financial future.
Pre-marriage considerations
Get the uncomfortable conversations out of the way
- Have an open discussion about your current financial situation. Think through assets, income, debt, and spending patterns. The key is clear and open communication. Sometimes these frank decisions can feel hard or uncomfortable but sharing your financial history now with your partner can help you form a solid financial plan while alleviating potential stresses in the future.
- Consider accessing credit reports (freeannualcreditreport.com) and determine your needs for establishing or rebuilding credit and paying down student loans, credit cards, or other debts.
- Have a discussion about each of your beliefs and values regarding money and family. Consider questions like: What is your first memory of money? What does money mean to you? How do you make financial decisions? How do you feel about your financial situation? How do you manage debt?
Set goals
- Discuss each of your short, medium, and long-term goals, including financial goals, family goals, career planning, retirement goals, and travel goals, to name a few. Think through how each partner can support the others goals and how to develop joint goals.
- The book Five is a goal-setting workbook that guides individuals and couples through a goal-setting exercise with the idea of sparking thoughts and questions along the way.
Were either of you previously married?
- If either of you was married before, are you now legally divorced? Will alimony, child support, pensions, and/or healthcare coverage cease upon remarriage Will alimony or child support need to be considered in your new budget?
Be certain your assets are protected
- Prenuptial agreements are useful when one or both of partners have substantial assets, an expected inheritance, family wealth, family assets, and/or a business.
- If you are considering a prenuptial agreement, consider reading Jonathan Robertson’s article “5 Myths on Pre-nuptial Agreements.”
Discuss the mechanics of your financial life
- Disclose your current spending habits, recurring and situational expenses, and budget. Determine how these factors will change when households are combined.
- Determining how you will manage household expenses can be a tricky or unsettling conversation if you already have a set way of managing your finances. Consider how to combine and manage these expenses. Some couples split expenses pro rata, 5Q/50. or one spouse paying everything.
- Consider your money management system. Some couples use one checking account for all income and expenses, some keep everything separate, and others utilize a “yours, mine, and ours” approach. There is no right or wrong way, and every partnership handles money management systems differently.
Post-marriage considerations
Update name
- If you’re changing your name, visit the local county clerk or Social Security Administration office to process any official name changes. Consider updating your driver’s license, passport, bills, financial accounts, and other essential documents.
Insurance
- Review property and casualty insurance policies, including homeowners or renters, automobile policies for lapses in coverage, under-coverage or duplicate coverage. The key here is to make sure that, when combining households, you have an appropriate level of insurance at a reasonable premium to cover all members of the new household.
- Review your health insurance to determine whether one partner’s coverage is best suited for both partners, while keeping cost, medical history, and medical expenses in mind.
- Review your coverage and needs for life insurance and disability insurance.
Beneficiary designations
- Beneficiary designations are legally binding documents that take precedence over your will, meaning your beneficiary designations determines who will receive your assets at your passing.
- Review and update your beneficiary designations on key financial accounts, including investment accounts, checking and savings accounts, 40i(k) or other employer-sponsored retirement accounts, and individual retirement accounts. Discuss who the appropriate primary and contingent beneficiaries should be for each account. For 40l(k) and other employer-sponsored retirement plans, your spouse is legally entitled to inherit those assets unless your spouse signs a waiver.
Estate documents
- If one or both of you have yet to execute estate documents, meet with an estate planning attorney to ensure your spouse is provided for and your goals are met in the event of passing away.
- Consider updating the agents of your durable power of attorney and health care power of attorney.
Tax
- You and your new spouse may be able to take advantage of potential tax savings. Determine your tax filing status as either married filed jointly or married filed separately. Consider updating your W-2 tax exemptions and filing status to account for changes in tax brackets.
Having thoughtful discussions before (and after) your marriage can ensure you and your spouse have a clearer understanding of your present and future financial life.
