You Don't Have to Combine Finances if You Get Married. Experts Offer Tips to Make It Work

CNET

3 days ago

JGI/Managing finances may not be a first-date topic but it's important to establish early on how you both want to approach money. As a married couple, managing money requires even more communication and shared decision-making. These negotiations can potentially be a bit more fraught if you want to maintain financial independence from your spouse.
Financial planner Uziel Gomez said many couples he's worked with start out approaching money differently and never decide on a clear plan.
"Clients often arrive with a system for managing their finances separately, which may have developed more by default than by design," said Gomez, a certified financial planner and accredited financial counselor.
Combining finances when you get married is not a foregone conclusion. In fact, if you and your partner each have your own money management methods that work for you individually, keeping finances separate can potentially help you divide your budget equitably.
Managing your own money can also offer you each more financial independence, which can become especially important if the relationship ends for any reason. We asked financial planners and legal experts to weigh in with tips to help manage separate finances when you're married.
Read more: More Couples Should Have the Money Talk. Here's Why (and How to Do It)
Discuss WHY you're keeping separate finances
Household money management might feel like a sensitive subject but avoiding these conversations could leave you unprepared to meet major financial or life goals together down the line.
Discuss why you each want to manage money the way you do, and set clear guidelines for what you'll each be responsible for and how you'll make big financial decisions like buying property and saving for retirement.
Consider the implications of income disparities
A difference in income could potentially lead to tension if one partner is reluctant to ask the other for help so it's best to get ahead of it, Gomez said.
An income disparity between spouses can create conflict in any marriage but it can be particularly challenging if you want to maintain separate finances.
One spouse might take on the responsibility of paying household costs while the other shoulders other responsibilities. But ask yourself:
What does that mean for your finances if the marriage ends?
How does it affect the way you plan for the future?
Can you build personal savings or a retirement account, even if you're not contributing to household expenses?
Discuss these questions with your spouse to make sure you're on the same page, especially as your incomes evolve over the years.
Keep a shared account (or more) for shared expenses
Gomez recommended that couples keep some shared funds even if most expenses are separate.
Feed money into a shared checking account to pay household bills so those can be automated or deducted electronically without added complications. He also noted that building a shared rainy day fund can help cover unexpected expenses or if one spouse is unable to pay their share.
It's important to discuss early on what the shared accounts will cover. Some common expenses you may want to include:
Mortgage or rent
Property taxes
HOA fees
Homeowners insurance
Utiltiies
Home maintenance
If you have a shared account, you can still build your own spending and savings accounts separate from your spouse. This not only lets you shop without the stress of shared decision-making, but it also helps you maintain financial independence if the relationship ends. And this doesn't necessarily mean divorce -- if the partner who always manages the money dies, it could create additional stress for the surviving spouse if they don't have control of the accounts or a credit history to help them rebuild their finances alone.
If you do share an account, make sure you both have access to review expenses and contributions to avoid any unwelcome surprises (like insufficient funds).
What to do if you have (or plan to have) children
If you're raising children (or plan to) with your spouse, keeping finances separated will likely require some additional work. This might be a good time to set up one of those combined accounts we just mentioned. The account could let you both contribute to day-to-day expenses as well as medical care, day care and education costs.
Some accounts, like a health savings account or 529 plan, can only be owned by one person. If you want to keep these separate for your children, you could each set up your own plan or have one plan that each partner contributes to.
If you don't have children yet but both want to have them in the future, setting up a "family" account for future child-care expenses is a smart move.
If either of you brings children from a previous relationship to the marriage, setting up a separate account for just their expenses will likely make sense, especially if the child's other parent is still involved.
Agree on how you'll file taxes
Financial experts tend to recommend filing taxes jointly if you're married because it gives you access to perks only available to married couples. But joint filing could be complicated if you want to maintain complete financial independence from your spouse.
Speak with an accountant about the tax implications of filing jointly versus separately so you and your spouse can decide together what works best for you. However you plan to file, also ask about tax deductions or credits tied to various household expenses, like mortgage interest, energy credits and home office costs, and take those into consideration as you decide who will pay for what.
Know who owns what under the law
Even if you maintain separate finances and purchase assets individually, those assets might be shared property under state law. Assets (and debts) acquired by either spouse while married are considered to be "community property" in nine states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin.
"Clients often face challenges when they discover that accounts or assets they believed were separate are considered shared marital property," said Nicole Sodoma, a family and divorce attorney.
That could mean your savings, retirement accounts, home, and other assets and property belong equally to both spouses, regardless of who paid for them or whose name is on the account.
A few other states let spouses opt into treating assets as community property, so pay attention to that decision when you get married. Community property is usually split 50/50 in a divorce unless you come to a different agreement.
If you live in a community property state, Sodoma suggested that putting assets in a trust might offer some protection. But that depends on state-specific laws so work with a financial advisor and an attorney to make plans that work for you.
Keep lines of communication open
Your financial situation will change over the course of your marriage so maintain an ongoing discussion about money. Sodoma recommended a regular family meeting to check in on financial responsibilities, goals and priorities. This type of meeting makes space for conversations about money and it lets you keep the rest of your time with your spouse free from financial stress or questions.
"Open and honest communication is crucial in any marriage, particularly when it comes to managing separate finances," said Gomez. "Establishing clear expectations and defining the roles each partner will play is essential for building a strong foundation for their financial future together."