We first want to congratulate our colleague Sarah Kircher on her recent marriage. We are so happy for Sarah and Christopher and the future they will share. This event prompted us to think about marriage and financial goals for couples and families, and we want to share with you information about how couples can best work together—specifically to address financial matters. We offer this advice gained from our own professional training and experience, and years of working with couples and families.
At the top of our list is the importance of establishing mutual financial goals for couples. We’ve found it is rare for couples to share the same goals at the outset of a marriage. So, we encourage you to sit down and talk through both long and short-term financial goals for yourselves, the marriage, and the family, whether existing or future. Differences should be expected, and compromise will probably be needed. This does not create a barrier for discussion but opens the door for couples to decide how to honor and merge their individual goals and, once this is accomplished, create a mutual plan.
A prenuptial agreement is one way to address these important matters on the front end. Through this process, you can address topics such as the assets each partner held before the marriage and the plan for those assets going forward. If there are children from a previous marriage, the agreement can address how each of the children will be taken care of financially. This worthwhile effort serves to remove misunderstanding and build trust.
The next step is to decide ‘who does what’. What strengths do each of you bring to the relationship, and how can financial responsibilities be allocated to take advantage of those strengths? For example, one partner may be particularly well suited to pay the bills and manage taxes, while the other manages the long-term investing. Once these tasks are agreed upon it is important to routinely discuss where things stand. For example, schedule a quarterly finance meeting to bring each other up to date and understand how things are going.
Here are other financial goals for couples that should be addressed and responsibly allocated.
- Designate Accounts and Spending Plans. How will you handle your bank accounts? For example, couples may have one joint account for household spending, and two individual accounts for personal. Each partner can keep track of their spending and regularly report on how expenses align with the agreed upon budget. By keeping one another informed, conflicts can be avoided and needed adjustments can be made.
- Evaluate Employment Benefits. If both spouses are working, it is important to review the benefits available for each. For example, if health insurance is better with one employer, select that plan for both of you. The same is true for retirement accounts, and insurance opportunities—life as well as disability. It is far more common for a partner to be unable to work due to illness or disability than to die prematurely, so make sure you are protected.
- Make a Healthcare Plan. This is especially important if a couple marries later in life. Create an outline addressing what decisions will be made regarding care, how and by whom. Make sure adult children or children from previous marriages are informed of your wishes so they can be involved. If you are unable to express your wishes during a critical time, this information will increase collaboration and reduce tension. Further, your children will not have the burden of making these decisions for you. These decisions can be formalized in your foundational estate planning documents including your Medical Power of Attorney, HIPAA Authorization, and Directive to Physicians.
- Plan and Designate Beneficiaries. Again, this is especially important for a blended family with children from previous marriages. Take the steps to make this process thorough and transparent and include all your children, thereby reducing the possibility of conflict among the heirs. This is a gift you can share with your family now, and they will appreciate it later.
Finally, prepare for an emergency. We never know what the future may hold, and we have all heard stories of unexpected events that changed many lives. So, make a list of your bank accounts, bills, insurance documents, and passwords. If one of you becomes unable to continue a task, make sure the other is prepared to take it on. Set up this information in a file and make sure it is easily accessible to your spouse, advisor, and adult children. The file may also include your estate planning documents with details regarding your medical team and their contact information, your wishes in the event of an unexpected death, and any burial preferences you have. Also include the contact information for those outside your family that you want to be informed of if something unexpected occurs, so they can be present to lend support and assistance.
And because every situation is unique, you may find that an impartial wealth advisor can provide objective guidance and enhance communication between you and your partner. Our team at ML&R Wealth Management is well equipped to guide these conversations and craft a plan. Contact us to learn more.