As a single investor, you have full control of your finances. You have the ability to control both the saving and spending. Your decisions are your own. When you get married, your financial future becomes a joint responsibility—in theory. Money issues are often the No. 1 problem that couples argue about.
When you’re young, combining finances can be easy as neither spouse likely owns much in the way of assets. Combining households once you’re older can be more challenging as each partner comes into the marriage with assets, debts, and established financial habits that can be hard to break.
According to Pew Research, about 67% of previously married adults ages 55 to 64 have remarried. Furthermore, 33% of newlyweds age 55 and older have been married three or more times. Before starting life as a couple, you and your future spouse should discuss the financial benefits and drawbacks to getting married and combining finances. It is also beneficial to have your CPA or your financial adviser run projections to see how today’s decisions may affect you in a few years. For example, would remarriage cause one spouse to lose her late spouse’s Social Security survivors benefit? Would one spouse be bumped into a higher tax bracket and receive a smaller paycheck after increased withholding? Will one spouse qualify for Medicare, leaving the other without employer-provided health insurance? Would the couple’s combined income affect a child’s ability to qualify for financial aid for their final college years?
Once you do decide to tie the knot, there are three areas that we believe are important to address. First, discuss how you wish to combine assets. Combining accounts means that your spouse has the same right to spend your money as you do. While you should trust your spouse completely, maintaining separate checking and savings accounts is often a comfortable starting point for couples. You may opt to create a joint account to pay household expenses. This may also be the way to test the waters toward fiscal compatibility.
When you do combine accounts, you need to be fully aware that you lose some control of how your assets are passed on when you die. Regardless of what your Will states, how the assets are titled and the account beneficiary forms often dictate who inherits your money. Most joint bank accounts have “right of survivorship,” meaning that when one spouse dies, the other spouse will automatically be the sole owner of the account. Furthermore, if you intend for your 401(k) to pass to your children from a previous marriage, your spouse must sign a waiver in addition to your children being named beneficiaries.
Finally, you will also want to address your liabilities as a new couple. In most states, debt brought into a marriage stays with the person who incurred it, while debt incurred after marriage is jointly owned by both spouses. However, that doesn’t mean paying off debt doesn’t warrant an honest discussion. The amount of one spouse’s debt can create difficulties when applying for joint loans for mortgages, obtaining affordable insurance rates, or saving an adequate amount for retirement.
These are just some of the basic money issues to consider when marrying later in life. The more money you have, the more there is to consider. Money issues can be a deterrent for many marriages later in life; however, with the help of financial professionals, your union can be a happy one. If you have questions regarding combining financial households, the experts at Henssler Financial will be glad to help: