When my grandmother got engaged at 19, a neighbor made her dress, a friend baked her cake, and she and my grandfather were married in two weeks.
Times have changed. According to the Pew Research Center, the average age at marriage has increased by roughly six years since the 60s, to 28.7 for men and 26.5 for women. With the age increase, most newlyweds are already functioning adults who have been managing their own lives and finances for years. My grandmother and her peers combined their finances because there was nothing to keep separate. Now, things are not so simple. Some people have assets that they will be bringing into the relationship and everyone has financial habits that may not be compatible with their new spouse’s.
Here are some tips to get you and your soon-to-be spouse on the same financial page.
Talk, Talk, Talk
Whether you combine all your finances or keep everything separate, figure out a plan for shared expenses and determine who will take on which money duties. Will you each put down a credit card at a group dinner? How will you handle groceries and other bills? Will you both be involved in budget decisions, or will you have a “family CFO”? There is no “right” system to have—just make sure you have agreed upon a system and that you discuss it jointly.
Filing “Single” Is No Longer Possible
Your filing status is determined as of December 31, so if you get married at any point during the year, you are considered married for the whole year in the eyes of the IRS. You can now file as “married filing jointly” or “married filing separately,” but “single” is no longer an option. For most people, it behooves them to file jointly, but now is a good time to work with a CPA to see what makes sense for you and your soon-to-be spouse. There are a lot of tax planning options available to married couples (think spousal IRA contributions) that should not be ignored.
Avoid Beneficiary Catastrophes
Now that you are forming your new family, it is a good time to name your spouse as beneficiary to any retirement plans (if that is what you want). For most institutions, this requires only a single form and can be updated quickly. Too many times, I have seen an ex-spouse named as the beneficiary of a retirement plan, which was far from the decedent’s intention.
To Pre-Nup or Not to Pre-Nup
Pre-nup is not the dirty word that you think it is. I believe that everyone should have a pre-nuptial agreement, whether or not you choose to create a legal contract. You should have a realistic discussion about what would happen if the marriage ended and/or you decide to separate your finances. If you decide to split assets 50/50, then no legal contract is necessary in a state like California, since your pre-nuptial agreement matches with the default for state law. If you want to split things differently, you’ll need to invest in a legal contract. It may sound counterintuitive, but you may find that having this conversation strengthens your marriage, because everything is out on the table and there are no surprises. Again, communication with your future spouse is key.
Get Legal
Whether you have an estate plan that should be updated or you are starting one for the first time, having a basic will, health care directive and financial power of attorney are tremendously important for any couple. Meeting with an attorney before you say “I do” can help you think through a lot of the tough questions and make sure you are both protected.
