Wealth Management Tips for Merging Finances

Building a relationship and getting married can be a beautiful process for individuals who have carved independent paths and are ready to merge their lives with someone special. Financial conversations about merging finances can bring additional considerations that could affect retirement planning, inheritances, and the relationship in general. We’ll discuss important wealth management topics and frequent questions we address with couples before they merge finances.

When Should Money Conversations Begin in a Relationship?

Typically, we see couples touch on the subject of merging finances when they plan to move in with each other. However, we believe having financial conversations early in the relationship is just as crucial. There is a lot to learn about your significant other’s goals, spending habits, debt obligations, and expectations. Many people form their values and beliefs around money early in life, which could make it challenging for couples who are set in their ways, so to speak, so proactive communication is key. You may consider the following:

• How will you divide and manage personal and household expenses?
• How will each partner’s spending, saving, or debt affect the other?
• Are you living within your means or paycheck to paycheck?

What Finances Can and Cannot Be Merged?

Deciding what to merge is unique to each couple, with various considerations for factors like income differences, expenses for children, and independently earned wealth. Here are some situations to consider:

• Shared Household Expenses: Couples typically begin by developing a joint budget and merging household expenses, either equally or equitably, based on their incomes. They may contribute monthly to a joint bank account or use a shared credit card. 
• Remarrying: Remarrying couples have typically learned from experience and may choose to keep previously held assets separate until they begin building wealth together. Each partner should also factor alimony payments into their individual or shared budget.
• Dependents: If you have dependents or minor children from this or a previous relationship, you should discuss expectations and a budget for paying expenses for everyday needs, insurance, college, and child support.
• Inheritances: Partners should thoroughly consider co-mingling inheritances, as those funds will be considered community property if the marriage ends. We recommend discussing options and implications with an attorney.
• Retirement Accounts: Generally, the only finances couples cannot merge are retirement accounts, as they’re designed for individual employment or ownership. Spouses and partners can, however, designate each other as beneficiaries on their retirement accounts to transfer funds in the event of death. While spouses or beneficiaries cannot contribute to their partner’s retirement account, conversations around retirement are essential.

When Should Couples Discuss Retirement Planning?

While couples cannot save in a joint retirement account, discussing each other’s ideal retirement is important. We guide clients in having these conversations early in the relationship to help avoid future conflicts and develop an agreed-upon plan. For example, it is critical to know if one spouse wants to retire early and move overseas while the other wants to retire near their kids stateside.

A wealth advisor can help you unify your ideal retirement goals and develop a financial plan to save equally toward those objectives by maximizing retirement account contributions and leveraging tax-deferred strategies.

How Can a Couple Protect Themselves and Their Assets?

We’ve discovered couples merging finances find keeping their assets separate until they begin earning together valuable in protecting their assets and avoiding financial conflicts. 

Discussing a prenuptial agreement with an attorney may also help protect your assets and the interests of minor children if the marriage dissolves.

Merging Finances: How Monarch Helps

According to Forbes, 28% of divorced couples report finances as a common source of conflict in their relationship. Beginning a new partnership and sharing your life with someone is an exciting transition, and having a mutual understanding of finances makes it all the sweeter. Our team often guides clients on the brink of merging finances in transparently communicating their needs, goals, and expectations. Here’s how we help:

• We’ll walk you through key questions and address topics important to couples, such as what financial freedom and security look like to you both, how you manage your finances, and whether partnering with a professional will be beneficial. 
• We hold ongoing meetings to discuss your concerns, prioritize your goals, and provide education so you can make more informed decisions about your money.
• As a Certified Divorce Financial Analyst® (CDFA®) professional, Wealth Advisor Irene Timmons specializes in advising clients through blending finances, addressing factors like asset protection, spousal and child support, and long-term planning to help avoid pitfalls.

If you’re facing a similar situation or one that involves complex business or estate planning needs, contact our team to learn more about combining finances in your relationship.

---

Sources: Forbes Advisor, Leading Causes of Divorce, Christy Bieber, J.D., https://www.forbes.com/advisor/legal/divorce/common-causes-divorce/