Marriage is not just roses, chocolates and diamonds. Marriage is a business relationship that needs thorough discussion and often times compromises. When couples plan for possible scenarios in the future, everyone involved is protected and feels secure. There are several ways that couples can ensure healthy financial decisions pre and post nuptial.
Pre-Nuptial agreements are agreements between couples that set out the division of assets should they become divorced or death occurs. It requires disclosure on the part of both parties of assets and intentions. Often times they can include stipulations for alimony and even beneficiary designations of assets at death. While not the most romantic topic, prenuptial agreements can have a positive position for a new marriage as their nature is defined by communication.
In today’s martial environment, it is likely that a newly-wed couple has already discussed and set forth a plan for comingling their assets and property. However, establishing constant communication about money matters is key to maintaining healthy financial life in your marriage. Being nimble and flexible to adjustments along the path is a smart play. If you are finding that a joint savings just doesn’t work for you as a couple, for example, don’t be afraid to adjust your strategy – just be sure the decision is made as a couple. Additionally, tax laws are ever changing, as such, regular review of the titling of assets and the beneficiary wishes are warranted.
Beneficiaries are a topic that needs to be explored in depth. Often times, especially with second marriages or if you had children prior to marriage, beneficiary designations are not always cut and dry. In the state of California if you are married and wish not to place your spouse as 100% primary beneficiary on your 401(k) account you must have their authorization. While other kinds of accounts are easier to designate it is important to communicate with your partner your thoughts and wishes.
Term Life insurance is a popular option for newlyweds or couples with young children. In this day and age, most households have two working spouses. Given this scenario, life insurance is a good idea to consider. These policies can ensure the security of the remaining living spouse and the care of any children. We go to great lengths to protect assets such as our vehicles and our homes and it is also prudent to protect your working life capital as well. Additionally, there are many other insurance products which could be of interest such as Home Mortgage Insurance, which pays off the balance of the mortgage upon the death of one of the spouses. The peace of mind that can be established from protective insurance products can ease many of the money pressures/worries of married couples.
Married couples, especially newlyweds have a lot of financial planning to do together. Planning for homes, children, and lifestyle are top of mind as you go about creating a life together. However, it can be easy to become enthralled with the day to day of your lives together and you may forget to plan for the future. Understanding each other’s goals, needs and expectations will allow you to navigate finances in the here and now but also in your ‘golden years’. Items that should be top of mind in terms of planning are saving for your goals and retirement as a couple, social security strategizing, and income needs. The sooner you discuss things and are aware of the others desires the more time you will have as a couple to work toward these achievements.
It is important to remember that marriage is a partnership – and in terms of finances a business partnership. All decisions should be made with thorough communication, compromise and feedback. Find your common ground!
Stay tuned for part IV, coming soon. Also check out part I and III of this series.