Knowledge and Insights

Your wedding planning checklist may look something like this:
1. Dress – bought
2. Tux – need
3. License – file
4. Guest list – finish;

however, it would be prudent for you to include on it some financial to do’s, such as:

• Review and modify beneficiary designations
• Review insurance coverage
• Make timely name and address changes
• Review combined net worth and assess debt and other obligations
• Assign financial tasks and set up a system to manage your household finances
• Review and update your wills, powers of attorney and medical directives.
• Create a budget/spending plan

Sound like fun?  Could this be your first argument?  That should not be the case.  A frank and open discussion of your finances both as single individuals and as a married couple should take place well before the walk down the aisle.  It is important to understand your financial obligations when you make that marriage commitment and to know that you and your significant other are on the same page when it comes to financial management.

In addition to understanding your individual and combined net worth, and setting expectations and ground rules with a spending plan and realistic goals, you also need to take care of certain legal matters that can create challenges if not handled timely.

So, Step 1 – Assess your financial wellbeing as a couple.

• Make a list of what each of you individually own and owe to others.  Be sure to include all your assets, including investments, retirement plans, real estate, life insurance, jewelry, autos, etc.  Debts should include mortgages, credit cards, car and student loans. Obtaining copies of personal credit reports can help with this process and can also alert you if there are problems that need to be resolved ahead of time.
• Review your insurance coverage – evaluating best coverages and identifying what policies can be dropped and what additional coverages will be necessary is extremely important. This exercise should include auto, homeowners or renters insurance, medical, life and disability coverage.
• Identify your housing options – renting versus homeownership – and whether either has lease obligations past the time you plan to combine households.
• Establish a spending plan and make decisions about managing your finances. Do you plan to combine everything into joint accounts and pay all expenses from the combined funds, or do you plan to retain separate accounts and contribute equally to a joint account for household expenses?  There is no right or wrong answer; you just need to set the rules and follow them.  Your plan should include a budget for both ongoing expenses and debt payments, as well as goals for larger purchases and longer-term planning. You should also establish who will be responsible for paying the bills and reconciling the accounts monthly.
• Take some of that wedding cash and start your rainy-day fund. You should always have a safety net of three-to-six months of expenditures saved and available for emergencies.

Step 2 – Take care of the legal stuff.

• This article would not be complete without a word about prenuptial agreements.  A prenuptial agreement establishes what you bring into the marriage and expectations of what will happen to those assets.  Despite its reputation as an indicator that the couple doesn’t have confidence in the marriage, it should be viewed as a planning document that gets the financial aspects and expectations of a marriage clearly established.  It can be especially helpful if there are children from a previous marriage or relationship or if certain business assets need to be managed and protected. Prenup agreements need to be established and signed prior to the marriage date.
• Once married, beneficiary designations on retirement plans, IRAs and insurance policies need to be reviewed and changed where appropriate.
• If you are changing your name, you need to do so with the Social Security Administration and  motor vehicle agency in your resident state and on your passport.  You will need to change your name with your employer, which also may be a good time to re-evaluate your income tax withholdings.  If you do not handle this timely and properly, you may not be able to timely file your tax return, have your social security tax properly allocated to your social security account or be able to establish proper personal identification.
• Wills, powers of attorney and medical directives need to be updated to include your spouse, providing the ability to handle your affairs or make decisions if you are unable.

Being financially responsible and up front with each other before the big day should not be viewed as unromantic; it’s probably the most thoughtful thing you can do to ensure a long and happy marriage.

Contact Marguerite L. Mount, CPA, CGMA, PFS, at 609-689-9700 or [email protected].