Money & Marriage: Help Set Your Loved Ones up for Success
Do you know a newlywed couple, a newly engaged couple, or a couple that is soon to be married? If so, you know someone experiencing one of life’s most significant transitions. Even if experiencing newlywed bliss, your loved ones have likely not been able to go their entire life without thinking about divorce or hearing the daunting statistics. They may already know that finances are often named one of the leading causes of divorce. As someone who helps individuals through divorce and someone who recently got engaged, the intersection of marriage and money hits incredibly close to home. There are several things your loved ones should consider before (and shortly after) walking down the aisle to help them start matrimony on the right financial footing and enjoy a long, happy marriage.
Before The Wedding
1. Communicate, communicate, communicate
Not to sound like a broken record, but communication is first and foremost. This is not only true for newlyweds, but I digress. Before your loved one says “I do,” it is key that they discuss their needs/wants/wishes/expectations for the marriage with their soon-to-be spouse. How will they handle their finances? This looks different for every couple, and all that matters is that they find a solution that works for them. The list of things to discuss goes beyond just the finances – do they want children? Will they pass on their faith to their children? What are their long and short-term goals? Having the hard discussions now will only make married life easier.
2. Full disclosure
Talking about finances can be challenging. However, surprises can also be difficult to overcome. Your loved ones should consider having a “full disclosure” conversation before their big day. It is a great idea for each person to run their credit report and share it with the other. Additionally, if salaries, expenses, assets, and debts haven’t already been divulged, it is best to have those discussions early on. Have a plan for paying down debt and for saving for the future.
3. Prenuptial agreement
The “full disclosure” conversation is an excellent segue to exploring a prenuptial agreement. Prenups may not make sense in every case, but if there are significant imbalances in the couple’s balance sheet or if a business is involved, it is a good idea to at least have the discussion. Once the couple has tied the knot, it is a straightforward path to unintentionally commingling assets.
After “I Do”
Everyone thinks about taxes right after their honeymoon, right?! Probably not, but it is wise to consider. Tax filing status is based on marital status on December 31, so your loved ones will be eligible to file married filing jointly in the year they are married. This is usually a tax advantage as the brackets are wider and deductions are doubled. It is prudent to talk with Human Resources as well to see if any withholding elections need to be changed so your loved one is not over or under-withheld.
2. Health insurance coverage
While stopping by Human Resources, encourage your loved one to revisit their spouse’s health insurance coverage. Marriage is a qualifying event that allows the couple to explore changing their coverage even if they are not married during open enrollment. Now that they are wed, one spouse may have better benefits or a lower-cost option that both could benefit from.
3. Life insurance & beneficiaries
It would be worthwhile for your loved one to look at life insurance if they did not previously have coverage. While marriage is not an impetus to life insurance, if the couple owns a home together, the dialogue around the mortgage and what happens in the event of an untimely death is a smart one. Furthermore, it is possible the couple already had life insurance and now needs to revisit their beneficiary designations. This applies to more than just a life insurance policy. Anything with a named beneficiary designation (IRAs, employer 401(k) plans) should be revisited to ensure your loved one has the proper people named. If a spouse will not be named as the primary beneficiary on a qualified retirement plan (for example, an employer-sponsored 401(k)), that requires spousal consent and a signature.
4. Estate plan
Lastly, it is sensible for your recently wed loved ones to discuss their wishes with their spouse and develop an estate plan with an estate planning attorney. This consists of the following important documents: Power of Attorney for Property, Power of Attorney for Healthcare, Last Will & Testament, and, if applicable, Trusts. While it is not usually a fun topic to dive into, both spouses will be better off in the event of an emergency if there is a plan in place.
As they say, without hard work, nothing grows but weeds. Your loved ones will reap the benefits of a little bit of work upfront and hopefully enjoy a long, happy marriage afterward. Please reach out to your wealth management team if we can be a resource to any of your loved ones going through one of life’s happiest transitions. Now, let those wedding bells ring!
As a wealth manager, Kristina's passion is building strong relationships. She enjoys providing clients with financial peace of mind and empowering them to make sound financial decisions. She is an integral part of BDF's Divorce Practice Group where she helps divorcing individuals through all aspects of the divorce process and through the next chapter of their lives. Kristina also has a specialization in marital planning.