Massachusetts small wedding reception

Many engaged couples spend more time discussing the wedding flowers and honeymoon than financial issues and attitudes about money that can affect their entire married lives. A reluctance to talk about money matters often stems from disparities in values, how your parents managed their wealth and fear that money may become a source of conflict in your relationship.

Combining your finances and balance sheets in a way that makes sense for both of you is achievable and can prevent unnecessary stress down the road. Before you say "I do," it’s a good idea to have a merging of the minds about how to handle ’the finances’ and plan your financial future. To start a financial plan that incorporates your combined needs, interests and values about money, have some frank discussions with your partner and consider seeking guidance from a qualified financial advisor.

Warm-up to talking about your goals and ask questions

Discuss your dreams for the future and prioritize near-term and longer-term goals that you share as a couple. Ask questions across the financial spectrum so you won’t be blind-sided by issues you’ve never discussed. What are your major concerns regarding finances? What are your financial styles; are you and your partner spenders, savers or one of each? Do either of you have financial obligations to other people, credit card debt or educational loans? Do you currently save for retirement through your employer and/or other plans? Have you developed a family budget with amounts allocated for savings? When making investments, are you conservative, moderate or aggressive?

Develop a financial plan

After you have discussed your individual financial situations, consider working with a qualified financial advisor who can evaluate your overall financial situation and provide guidance that can maximize your portfolio and help minimize "financial strain" on your relationship. A good advisor will work with you to build a comprehensive financial plan and analyze your risk tolerance, asset allocation, any concentration issues (an inappropriate allocation of one security or industry), fragmentation (many small positions that do not add value to your portfolio) and much more.

A financial advisor can also help with creative financial strategies for obtaining that dream house or an additional degree. For example, if you have parents or grandparents who want to help you get started, there are ways to pledge their assets and buy a home at low, interest-only rates.

Update important documents

A financial advisor can work with your attorney to provide guidance on important changes to documents when getting married including updating wills, living trusts and beneficiary designations. It’s also a good idea to review your insurance needs including disability insurance.

Discuss how to handle philanthropic contributions

If you both have charitable and philanthropic interests, discuss your individual goals and their similarities and differences. How can you allocate your contributions as a couple to make the maximum impact? A coordinated program of charitable giving can enhance your ability to help others while also reducing taxes. Determining a philanthropic strategy as a couple can also encourage the value of charitable giving in the long term for your children and grandchildren.

Talk about joint and/or separate bank accounts

Discuss the nuts and bolts of maintaining or merging your bank accounts, credit cards and investments. There’s no single right way and different financial systems work better for different personalities. Often, trial and error is the only way to work out a good solution that works for you.

Discuss basic options for bill-paying/checking accounts including joint or separate accounts - with or without a combined "household" account. A household account allows each party to contribute funds in an equitable way to cover basic family expenses. Separate accounts can be kept for individual bills including obligations to a former marriage.

If you decide on one joint account, it’s a good idea to set reasonable limits for "routine expenses" that don’t need to be scrutinized by both parties. Set a threshold amount for purchases that should be discussed together but incorporate enough financial freedom for partners to make purchases and buy gifts without having everything monitored.

Designate financial roles

While one partner may operate as the chief financial officer within the family, it’s important for both individuals to participate and understand how the household finances work so either one can take over financial responsibilities in an emergency. Divide the tasks or take turns over a certain time period.

Consider a prenuptial agreement

Pre-nups are becoming more common and are no longer reserved for only the very wealthy or second or third marriages. Due to the not very romantic statistic that nearly half of all marriages end in divorce, the idea of a prenuptial agreement - or certainly a discussion - to spell out how financial issues would be decided if the marriage ends can be a very smart, practical idea. A valid prenuptial agreement can limit the court’s and state’s ability to dictate property settlement terms if a marriage is ended. These agreements typically enable individuals to keep premarital assets separate, provide for children from previous marriages and protect assets for other dependents or wishes.

In order for a prenuptial agreement to hold up in court, it cannot be signed with either party under duress, both parties must have had separate legal counsel and all financial assets and liabilities must have been fully disclosed. Pre-nups can address a wide range of financial issues and asset categories outside the scope of this article. Some of the major areas include strategies for:

Keeping premarital assets separate
Dividing marital property
Dealing with jointly purchased assets during your marriage
Calculating ongoing support payments
Establishing retirement assets for a non-working spouse
Addressing expected inheritances
Considering the value of non-financial contributions such as child-rearing

Prenuptials typically provide terms and settlements linked to the length of the marriage. If a marriage only lasts a short time, there may be no support or far less support than if it lasts for a number of years. A prenuptial also usually outlines certain terms if either party dies that must be incorporated into each spouse’s estate plan.

What is a post-marital agreement?

If you failed to consider a prenuptial before the wedding, there is also a ’post-marital’ agreement that allows married couples to outline how they want their property divided in the event of a divorce. These agreements can address which spouse has rights to certain property or a vacation home, an interest in a family business, etc.

Since pre and post-marital agreements involve important legal issues, it’s extremely important for both parties to obtain counsel from separate lawyers.

As you get caught up in the planning and excitement leading up to the big day, don’t shy away from dealing with financial issues. If you can establish good communication about "the money" and start a sound financial plan at the outset of your partnership, you will add greatly to your chances for both marital and financial success.

About the Author: Heather Walsh is a Vice President and Wealth Management Advisor for Merrill Lynch in Burlington. Heather assists clients in developing long-term financial plans and helps them develop strategies to manage their personal and business finances. She can be reached at hwalsh@pclient.ml.com.

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