Life Stages Planning: Marriage
Updated: Jul 28, 2020
Getting married is a very significant life event, where two individuals (oftentimes with very different backgrounds and experiences) come together to start a new life. When it comes to financial planning, marriage is a critical life stage, where it is important to take the time to make sure that your new household is fully aligned regarding your finances and long-term goals. While we know that marriage is built on a foundation of love, it is also essential to start your marriage off right when communicating about money, planning for your future, and creating life and financial goals together. Below are some pieces of advice for anyone that is in (or around) the life stage of marriage.
Because marriage is legally binding, that also means that once the knot is tied, assets also become legally binding to each spouse. Therefore, to make sure that your estate is in order, we recommend reviewing the following items.
Before you were married, you most likely listed your parents or a sibling as beneficiary to most of your assets. After you get married, you will want to update your beneficiary lists to put your spouse as primary. After you have your spouse listed as primary, you still have the ability to add contingent beneficiaries as well. There are several benefits to listing your spouse as the primary beneficiary. For example, if you name your spouse as beneficiary, you can potentially avoid income and estate taxes. Additionally, your spouse can roll over your retirement account to his or her own IRA.
CREATE AND/OR UPDATE ANY WILLS OR TRUSTS
Most single individuals do not have a will or trust established. However, if you already have one or both set up, make sure to update them after you get married. This is important in the event that you pass away. If you do not update these legal documents, your spouse may be left with nothing.
Alternatively, if you have not created a will or trust, a new marriage is the perfect life event to nudge you in the direction of establishing these important legal documents. As your marriage grows and more assets are obtained, children are born, businesses are built, etc., it is critical to have an estate planning document that outlines your household needs and wishes if anything were to happen to either spouse.
POWER OF ATTORNEY (POA)
A power of attorney (POA) is another important estate planning tool that all married couples should consider. A financial power of attorney (POA) is “a document appointing someone else to have the authority to manage your financial affairs on your behalf.” (1) POAs come into play when an individual is incapacitated. As a newly married couple, it is important for you to assign a POA that is someone other than your spouse. The reason for this is because, in the case that you are incapacitated and there is a life event where transferring or selling a joint asset is necessary, your spouse cannot sign for you. The agent that is acting as the POA will have to sign. There are many other factors to consider and situations in which it makes the most sense to not have your spouse listed as your POA.
RETITLE ACCOUNTS AND PROPERTY DEED(S)
There are many different ways that your accounts can be titled. For example, you can have an individual account, Joint Tenants with right of survivorship (JTWROS), Tenants in Common (TIC), Transfer on Death (TOD), etc. It is essential to make sure that all of your accounts are titled correctly after you get married, and it is also critical to make sure that the titling aligns with your will and trust.
The importance of titling or re-titling also applies to property deeds. After you get married, make sure you review and update if needed.
FIRE SAFE OR DEPOSIT BOX FOR IMPORTANT DOCUMENTS
With the takeover of technology, computers, and smartphones, you may think that storing physical documents is a thing of the past. That is certainly not the way we look at your most important legal documents, and we hope you agree with us. We recommend to all of our clients that they have a secure fire safe or deposit box in their home to be used to store all important documents or irreplaceable valuables, such as stock certificates, heirlooms, title deeds, and family records. Try to avoid storing items that you will need to periodically access.
MASTER LIST OF ACCOUNTS AND PASSWORDS
Nowadays it is certainly true that we have all accumulated a massive amount of online accounts and passwords. Whether it be our cell phone service account or our 401(k) retirement log-in, the list goes on and on. Once you get married, now you have even more accounts to keep track of. Because of this, we highly recommend that you create a master list of accounts and passwords that both you and your spouse know about. Make sure to keep this list safe and secure at all times. We also recommend looking into password managers such as LastPass, Dashlane, 1Password, etc., to consider as an alternative to a written-out list or something stored in an Excel file.
ESTABLISH OR REVISE YOUR FINANCIAL PLAN
Most young couples may think that financial planning is something that they don’t have to consider until they get older. That is actually the furthest thing from the truth. In reality, the earlier that you create a plan for your financial life, the better off you will be in the long run when it comes to achieving your financial goals. The earlier you start thinking about goals such as having children, buying a new home, paying for your children’s college tuition, saving enough money for retirement, etc., the more peace of mind you will have as you navigate through your marriage.
Now that you are a newly married couple, establishing a financial plan allows you the opportunity to start thinking of the future that you want to create together. This is an exciting time, and planning for the future will help you achieve the dreams that you want for your new family.
RE-EVALUATE NEEDS AND OBJECTIVES
After you get married, it should make sense that each spouse will have different needs and objectives than they did before becoming married. That is certainly not to say that your individual needs and objectives will have to fall by the wayside. However, now we have each spouse’s individual needs and objectives plus the married couple’s joint needs and objectives. This is a great thing, but next comes the important step of communication and prioritization.
Now that you are creating a new financial plan together, there may have to be compromises on either end. Alternatively, if you have not thought through some of the bigger-picture items that most married couples face at some point (having children, paying for college, buying vs. renting, vacation, retirement, etc.), this is a great time to start those conversations and come together on an agreed-upon plan of attack.
CHANGES TO YOUR HOUSEHOLD BUDGET
Before getting married, budgeting for yourself is easy in the sense that you have the ultimate say in how you spend your money. Once you are married, it is now not only about your needs and objectives. Therefore, budgeting is an important topic that all married couples should consider right away. To go a step further, you can even get ahead of the game if you begin talking about budgeting even before you say “I do.”
Just as we discussed how compromises will have to be made regarding your new financial plan, the same is true for your new household budget. If you and your spouse have created your financial plan built around agreed-upon needs and objectives, it is vital that you stick to your household budget. You may have to change some of your spending habits from before marriage, but as long as you and your spouse communicate about this topic, you should be able to achieve all of your financial plan goals.
LIFE INSURANCE COVERAGE
Life insurance is not something that most single individuals consider. Now, there are exceptions to this rule, but in most cases, life insurance is most important when you have a spouse and/or children.
If you are a newly married couple, we highly recommend considering Term Insurance. The last thing you want to do is get married, buy a new home with your spouse, and unexpectedly pass away. In this extreme case, you would be leaving your spouse responsible for paying off the entire mortgage with one income. If you have life insurance for yourself, you would alleviate such a risk.
DISABILITY INSURANCE COVERAGE
One of the most important assets that anyone has is their ability to work and earn a living. To mitigate the risk of not being able to work in the future, married couples should highly consider disability insurance. Because you are married and now providing income for a household (not just yourself), it is prudent to make sure that you cover the risk of not being able to work due to an injury, accident, or unforeseen complication.
BUYING A HOME TOGETHER
After the wedding, there are many important life events that traditionally soon follow. One of those life events is buying a home. This is a very exciting time, and it is critical that you and your spouse make the best decision given your resources, needs, and goals. There are many things to consider when buying a home, such as credit scores, interest rates, loans, mortgage insurance, etc. Because this is such a major investment into a married couple’s future, being as informed as possible and planning ahead are two tips we always recommend.
YOUR FIRST STEP
If you’re feeling overwhelmed or unprepared for the many financial considerations of marriage, chatting with a financial advisor to review your financial strategies may help you feel more confident. At Mellen Money Management, we specialize in walking our clients through the many milestones and transitions they face in life. If you’d like to make sure your bases are covered and your finances are optimized, set up your free introductory phone call online today!
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