Money Matters: Financial considerations when getting married

Jeff Witz, CFP

The marriage process requires careful thought about several financial situations many couples will likely face. With financial disagreements being a leading cause of marital problems, why not tackle them 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 fiance/fiancee about your overall finances. For example, how much debt is each of you bringing to the marriage? What about savings? How is each of your credit ratings? What are your income and tax circumstances going to look like? The older you are, the more (good and bad) financial baggage you're likely to bring to the partnership.

Next, from a banking standpoint, you’ll need to decide if you will be combining accounts or keeping them separate.Your financial adviser can walk you through how to combine your individual checking, savings, and money market accounts. He or she can also advise you about adding or changing beneficiaries on your individual retirement accounts and other retirement plans. Even if you decide to maintain separate accounts, it may be helpful to have at least one joint account to pay for shared expenses, such as 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 a spouse dies. When there are separate accounts and a spouse or common-law partner dies, the survivor will be excluded from the separate accounts if the estate goes into probate. A probate settlement could take months and add additional expenses due to court and attorney fees.

If you are both employed, you must take time to review and coordinate your employee benefits. You might save money by eliminating duplicate health care, for example. This process also allows you to determine, and then make any changes to, the beneficiary designations on retirement plans and insurance policies held through your employers.

Next, sit down and identify your 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. Also look beyond your current financial situation. For example, discuss what you envision retirement will look like, and whether your current retirement account contributions are sufficient to achieve your long-term goals.

People who have been previously married may bring additional financial complications to the table, especially if they have children and/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.

Marriage is also a good time to meet with an estate planning attorney and get a plan in place. Estate planning is often pushed aside because it deals with a question most couples don’t want to discuss: “What happens if one of us dies?” However, it is important to have those conversations and formulate a plan. A will may be a good first step, or it may not be necessary depending on the type and value of the assets owned. An estate planning attorney will be able to provide specific guidance. Having health care and durable powers of attorney in place is always a smart idea in the event you are incapacitated. Depending on your assets, certain trusts may also play an important role in accomplishing your estate planning goals.

Remember that whether or not it's your first time down the aisle, marriage is a celebration. Don't let all 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 can alleviate potential stress well beyond your wedding day.

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