Life Events Guides - Marriage

Before You Get Married
Financial problems are a major factor contributing to many divorces. But you can't completely safeguard yourselves from these problems. So how do you keep financial mishaps from putting undue strain on your relationship? Like everything else in a marriage, communication is the key. Know each other financially and be willing to talk openly about your present financial situation.

So spend some time getting to know your future spouse's financial history. Swap credit reports. Ask what he or she expects and wants.

Prenuptial agreements
Some think that a prenuptial agreement is a matter of trust, or lack of in some cases. It can be. But it can also be a statement that both parties agree on certain terms as they enter into the marriage. It will also help both parties know what to expect if a marriage doesn't work out. It may not be the most romantic topic during marriage preparations. But it could be an important step and you should at least consider drafting a prenuptial agreement.

From a legal standpoint, it is a good idea to create a prenuptial agreement if:

• You have wealth you would like to preserve
• You have children from a previous marriage or relationship
• You own a company
• You have a good chance of becoming famous
• You expect to inherit a lot of money or other assets
• You have ongoing family related financial obligations
• One partner earns much more that the other

Leave yourself enough time so that you can both think about your prenuptial agreement. It will make sure there is more clarity about the situation. It will also make the prenuptial agreement harder to challenge.

Postnuptial agreements
If you're already married or your wedding is coming up quickly, but you still want some kind of financial agreement, a postnuptial agreement is an option. It accomplishes the same basic thing as a prenuptial agreement. Postnuptial agreements are often created when one partner comes into wealth and wants to protect it.

Starting Your Financial Life Together
Once the ceremony is over it's time to get to the practicality of day-to-day life together.

Who does what?
It's time to divide up the chores. There's laundry, yard maintenance, cleaning, and, of course, a lot of different financial responsibilities. Who's going to balance the checkbook? Who will pay the bills? Who's going to keep track of investments?

You don't necessarily have to divide these tasks and take exclusive ownership if them. Just make sure you have some system in place so that these important tasks get done. You can divide them by strengths and weaknesses. Or pick randomly from a hat. This isn't about who's the better person in financial matters. It's about taking care of your joint responsibilities together.

Change your beneficiaries
Go through each of your accounts that are held in beneficiary form - retirement plans, IRAs, insurance, etc. - and review the beneficiaries listed on each. Be sure to change the beneficiaries to your new spouse if you want him or her to receive these funds should you die.

Review your insurance
Your life situation has changed and your insurance coverage probably hasn't. Your spouse may have some insurance policies as well. Compare them to make sure they don't overlap - that usually means wasted money. Combine coverage where you can and you could save quite a bit of money.

Name changes
If you are changing your name as a result of your marriage, either a completely new last name or a hyphenated last name, you'll need to change your name on many different documents. Notify the Social Security Administration immediately. This is extremely important because you want your retirement account properly credited. Also, the next time you change jobs, you will need to show your new employer your Social Security card with your new name. Change your name on your driver's license as well. Because it is often used for identification, it is one of the first things you'll want to change.

Develop a budget
Hopefully you each have a budget that you've been working with as individuals. It's now time to update and combine those budgets to reflect your new shared living situation. Click here for more information on how to build a budget.

Goal and Career Planning
It's important to know not only where you are, but where you want to be. Define what you want, and the means to get there will become much more apparent.

Retirement
No matter what your other goals are, a comfortable retirement should always be on your list. The degree of comfort, however, is entirely up to you. If you want to live in luxury in a beach house in Florida, you'll need to save a lot. But even if you don't plan on living the high life, you won't be able to work forever. Start planning now so that you're not forced into a difficult position when you're older.

Get out of debt
If you have considerable debt, one of your first goals should be to pay it off. The interest you pay is sabotaging your other financial goals. Once you get out of debt, the rest of your goals should be much easier to reach. Start by getting an accurate picture of your entire debt. Then, working with your budget, construct a plan to pay off your debt. Try to trim other areas of your budget and increase your monthly payments on that debt until it is all gone.

Do both of us have to work?
In our society, double income families have become the standard. But there no reason you have to be standard. If both you and your spouse are career oriented, that's great. You can both continue to work and really rake in the money. But if money and career aren't strong motivating factors in your life, you may be able to work out a plan to live on one income. You don't need kids to stay at home. If you take a hard look at your budget, you may be able to afford it now. Otherwise, you and your spouse may be able to work out a plan, paying off your debts and increasing one income, to allow one of you to stay home.

The Annual Family Financial Meeting
Sit down at least once a year, preferably more, throughout your marriage to have an involved discussion about your finances. Don't wait until crisis time to review and plan. That can lead to much more stress and general anxiety associated with financial discussions. Instead, your annual financial discussion allows you both to calmly and rationally assess where you are, determine if your financial goals have changed, and decide what you need to do to meet your goals. If you have this discussion more than once a year, you'll be that much more financially in sync.

Other topics of discussion should include:

Important Documents
You both should know exactly where all your important documents are located including insurance policies, wills, tax forms, bank account numbers, investment specifics and more.

Current Debts and Assets
Add up all of your debts. See how much you have paid off in the past year and decide if that's acceptable or if you need to try harder in the coming year. Do the same with assets. Understand how your money is working for you and try to determine if it should be working harder.

Budget
Get an idea of what you've been spending your money on. If your spending doesn't match your priorities, fine-tune your budget to help you get the most out of your income.

Re-evaluate Your Goals
Revisit the financial goals you made in the last annual meeting. Are you moving towards those goals? Do those goals still matter to you? Talk about any other goals you would like to work on, both short-term and long-term.

Find Your Vulnerability
Find the weak links on your financial armor. Do you have too much debt? Are either of your jobs/incomes not secure? Do you have insufficient income to cover your spending? Just identifying these weaknesses can help you avoid some pitfalls. But you should also talk about how you can strengthen these areas and incorporate these strategies into your financial goals.

Day-to-day Responsibilities
Is the division of responsibilities you made still practical? Is it working out or does one person feel overburdened?

Learning About Yourself
What have you learned about your financial self in the past year? It's as important that you talk about your feelings concerning money matters as it is to talk about the practicality of money.

Together or Separate?
Even though vows now hold you together, you may still want to act separately in some areas.

Taxes
Once you're married, you will have the option of filing your annual income tax returns separately or filing them jointly with your spouse. Filing jointly simply means that you will, as a couple, add your income and deductions together. Most couples file jointly, because it is easier to file one return rather than two, and some deductions and credits are limited if you are married and file separate returns. If your taxes are not complicated, it may be beneficial for you to figure your taxes both individually and jointly to determine which method gives you a better result. If your taxes are complicated, you might want to consider asking the advice of a tax professional.

Bank accounts
You'll have to decide how much financial autonomy you want to have. You can keep separate bank accounts and divide the bills you have to pay. That will offer each of you some spending money to use freely. Another option is to put all of your income into one account and pay all your bills from there. This option requires some skill, making sure you aren't spending too much of the family's money on yourself. A combined approach is also possible. Maintain a joint account while allocating "individual spending" money each month.

If you decide to hold any of your accounts jointly, be sure to keep track of your transactions carefully and to communicate them to your spouse. With two individuals using one account, tracking cash flow may be difficult.

Credit cards
You should each keep at least one credit card in your own name, to maintain a credit history of your own. If you divorce, or one of you dies, it will be much easier to get a mortgage, loan or credit card with some individual credit activity.

Estate Planning
It's hard at the beginning of a marriage to think about the end of a marriage. But in "Until death do us part," you're setting the stage for one of you eventually to have to deal with the death of the other. Putting the legalities in place well in advance of the actual death of a spouse will allow you both to make decisions together, with a clear mind and without the stress of losing a loved one.

Wills
A will is the first step in estate planning and should be at the top of your new married "to do" list. After you die, the provisions of your will determine who will inherit your property, who will become the guardian of your children, and who will wrap up your financial affairs.

Trusts
A trust allows you to have more control over the money you leave to someone than does your will. For example, if you leave money to a young child, it can be put into a trust and only be used for education. Or the money could be disbursed to the child when he or she reaches the age of 18, 35 or even 50. A trust also protects the money from creditors since it cannot be taken from the beneficiary to pay debts. You even can control what kind of an account the money is put into and how it is invested.

Powers of attorney
If you are unable to make legal decisions because you are somehow incapacitated, someone will need to make these decisions for you. You need to decide who this person will be in advance. This is called giving someone power of attorney.

There are two main types of powers of attorney. A durable power of attorney gives a person, or people, authority to manage your finances and other legal affairs for you if you are not capable of managing these yourself. It can be long-term or short-term and allows the party that has power of attorney to use your money to take care of you, sign your tax returns, handle your investments, and other important matters. The power of attorney can be effective now, or be a springing power that becomes effective only upon your incapacitation.

A healthcare directive is a power of attorney that allows the person you designate to make healthcare decisions for you if you are unable to make those decisions yourself. For example, someone holding power of attorney can decide on heath care options, and possibly even ask doctors to turn off your life support systems if he or she feels that is what you would have wanted.

Living will
A living will is a clear statement about your wishes regarding artificial life support. If your brain is dead and your body remains functioning only with the help of life support, a living will directs attendants in what choice to make for you.

Testamentary letters
A testamentary letter is similar to a will except that it deals with items of smaller value. Through this handwritten letter you can designate who inherits such items as dishes, art, photos and other heirlooms. This letter is a handwritten document, and it should be referenced in the will. Many states recognize a testamentary letter as legally binding, but it is probably a good idea to have your letter signed by a witness.