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MARRIAGE

Marriage is an extremely exciting time in a couple’s life in which everything seems to happen at once. The rush of decisions that must be made is often overwhelming—especially for younger couples. Although the foundation of any marriage is love, financial issues can cause stress that could lead to future marital problems. No matter what stage of life you are in, it is important to solidify the financial decisions surrounding the marriage, so you can focus on what is most important: each other.

 
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Bank Accounts

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Ok, now the wedding has passed and you both are ready to start your new life together. Besides the cost of changing your name, which could be anywhere between $100 -$500, there are several important financial decisions that you should consider next.
 

  • JOINT OR SEPARATE BANK ACCOUNTS? 
    This is often one of the first decisions that couples will have to make when it comes to their finances. This can be awkward, especially if one person wants a joint account and the other would like to keep their accounts separate, but it is a frank conversation you should have. Some couples decide to keep their own separate bank accounts, but then have one joint account to pay for mutual expenses or for a specific savings goal, such as travel. 
     

  • SPENDING HABITS: 
    Often opposites do attract- spenders marry savers and vice versa. Some people are inherently more cautious with their money and follow a strict budget, while others may just “go with the flow.” While dating, these tendencies can be overlooked, but when two people get married and their finances become intertwined, this can lead to issues in the future. Talking to each other about spending or budgeting habits in the beginning and coming up with a compromise that both spouses can agree with can prevent future problems.
     

  • ROLE ASSIGNMENT: 
    One strategy could be for one spouse, typically the saver and budgeter, to oversee paying all the bills and setting aside money for emergencies and retirement, while the other oversees the account that pays for the new car or the next vacation.
     

  • SET FINANCIAL GOALS: 
    Financial goals are most easily attained when you start early and consistently work towards them. Talking with each other about what is most important to the other partner will increase your probability of success. Some typical goals to consider:

    • Saving for a new home

    • Early retirement

    • Travel
       

  • UPDATE BENEFICIARIES: 
    Each partner should go through each of their accounts such as and bank accounts (if kept separate), retirement/brokerage accounts, life insurance or any other account and add their spouse as the beneficiary, if this is the desired outcome.

Insurance

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LIFE:
Death is a subject no one wants to talk about, but an early death can be financially devastating for the survivors. Most young people don’t have life insurance, and if they have no dependents, aren’t in a rush to get any. Newlyweds should at least consider getting term life insurance for protection against early death. No one wants to leave their spouse with having to pay for a mortgage or other debts on one income.
 

DISABILITY:
Your chance of becoming disabled - at least temporarily - is higher than your chance of dying. Disability insurance is income protection, and if it is offered by your employer, you should seriously consider it even if you aren’t married. This need to protect your hard-earned income is magnified after marriage, and life is built around 2 incomes.
 

HEALTH: 
It is important to review health insurance policies to determine if both spouses need to continue their coverage. It is sometimes more cost-effective for the spouse with better health coverage to add the other as a dependent instead of having 2 coverages.

  • Health Savings Accounts (for more info refer to our Healthcare section): Consider contributing to an HSA if you are both covered under a High Deductible Health Plan (HDHP). Also, if either spouse already has an HSA, make sure you are still eligible if one of you decides to join the other’s health plan.

  • Flexible Spending Accounts (for more info refer to our Healthcare section​): You may want to consider contributing to an FSA for yourself or for dependent care. This can be used either in lieu of the child tax credit or in conjunction with it.

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Estate Planning Needs

LIVING WILLS:
Drafting a will is a task that no one likes to do, like purchasing life insurance, but it is important for each spouse to have. This will ensure that if something were to happen to either spouse, their assets and belongings go where they would like them to.

GUARDIANSHIP: 
This is for couples that have children. If something were to happen to both spouses it is important that a proper guardian be assigned for the surviving children.

TRUST:
There are many benefits of setting up a trust for future asset transfer which you may want to consider. These are often looked at as options only for the ultra-wealthy but can be useful to middle-class households as well. Some things to consider when thinking about setting up a trust:

  • Avoid Probate: Probate can be a long process, which could leave your surviving loved ones without their inheritance in a very stressful time in their life. Setting up a trust may avoid this process, giving access to these funds more quickly and efficiently. This may also save on attorney fees as well.

  • Protection of Assets: Setting up a trust can give your family greater legal protection from anyone that may be unhappy about how your assets are distributed.

  • Flexible Distribution: The grantor (person that establishes the trust) can give conditions for how they would like funds distributed. This is often used when passing money down to children. Stipulations can be put in place about what the money can be used for.

  • Tax Advantages: Funds distributed from the trust’s principal balance are not taxable to the beneficiary.

  • Protection from Creditors: Some trusts can protect the assets from creditors, whether creditors intend to collect from the grantor or the beneficiary.

  • Fees: One of the main drawbacks of setting up a trust that it generally costs more - initially - than setting up a simple will.

POWER OF ATTORNEY: 
There can be either medical POA or financial POA. This person is someone you can trust to make decisions on your behalf when you are no longer able to.

HEALTH CARE PROXY:
This document allows each spouse to make medical decisions on behalf of the other if they should become incapacitated. A Health Care Proxy can be set up for children as well if something were to happen to both parents. See our healthcare topics for more information about medical coverage options.

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529 Plans  

529 plans are a great way to save for a child’s education. Parents may want to consider setting up a plan as early as possible to take advantage of years of compounding. Like a retirement account, there are tax advantages associated with 529 plans. Also, for soon-to-be parents or for couples planning on having a child in the near future, a 529 plan can be set up before the baby is born. This is done by a parent opening an account and naming themselves as the beneficiary, and then naming the child as the beneficiary after birth.

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