Hearing Wedding Bells? Be Sure Finances are Included in Your Planning
By Gerald Rome, Colorado Securities Commissioner ~
It’s that time of year again: wedding season. Whether you are taking the plunge later in life, perhaps for a second time, or advising a young couple about to make the ultimate commitment, much of the considerations are the same. There is perhaps no topic less uncomfortable but more important than that of finances. Statistics show that finances are the leading cause of stress in a relationship, and upwards of 35 percent of people name money as the primary trouble area with a partner. So, before you or a loved one sets off on the great adventure of marriage, be sure to check the following boxes:
1) Be transparent. Many couples who divorce cite a lack of honesty about finances as a contributing factor, so before you walk down the aisle, be sure you know everything – both the good and the bad – about your betrothed’s financial past, spending habits, investing philosophy and goals for the future. Take time to sit down and share information on major debts from education, business, and home loans as well as credit scores and bankruptcy history. If you are entering a second marriage, be honest about obligations to a former spouse, and talk openly about issues you may have had surrounding money in the past. When it comes to the discussion about individual or joint accounts, be practical. Particularly for couples marrying later in life, consider how or whether to merge accumulated assets, as well as how to compromise on handling financial affairs after what may have been many years of individual decision-making.
2) Assign financial roles. When considering co-mingled finances as a couple, it’s important to make sure you are on the same page regarding who will handle what. Will one person be responsible for paying all the regular, monthly bills while another keeps an eye on the larger financial picture? How will you as a couple address large decision-making, and who will ensure that all necessary documents are up-to-date and organized? Regardless of who will do what when it comes to management, for older couples in particular it is important that both parties commit to maintaining financial literacy and an awareness of household finances. Many financial issues that arise later in life are due to one spouse being out of the loop, and then finding him or herself facing a mountain of new information and decision-making in the event of a spouse’s sudden illness or death.
3) Cover all legal bases. Particularly if one or both parties are entering the union with significant assets, consider a prenuptial agreement. Spelling out what will happen to assets in the event of a failed marriage or the death of a spouse isn’t about a lack of trust, it’s about being prepared. Additionally important for couples of any age, but especially for older adults, is estate planning. Organizing your property now will ensure that no matter what happens your families’ financial needs will be met. This means assigning or updating powers of attorney, creating or revising wills, purchasing life insurance policies, revisiting retirement accounts and investment funds, establishing trusts and beneficiaries, and considering any tax implications.
When the weather is nice and love is in the air it’s tough to have to face the prospect of honest and sometimes messy financial conversations and decision-making. But time and time again, couples who avoid these necessities because they are love-struck and blind to what the future may hold end up regretting it later. Take advantage of the time when life and your relationship is rosy, and plan for the inevitable bumps that any marriage will encounter. You and your spouse will never regret it!