So you’re getting married!
Avoid a collision when merging finances

By:  Cathy A. Norris CFP®, CLTC, CRPC®

So you’re getting married. In addition to planning your wedding, your preparations should include planning how your finances will blend in your new joint household.  Since money is a frequent sore spot for couples, you can get your union off to a stronger start with a proactive approach to merging your finances.

Start by laying your cards on the table before the vows are exchanged. There should be no surprises about lingering debt or unpaid child support after the nuptials have occurred. Current and future obligations, earnings, savings and also personal spending habits are all fair game for this heart-to-heart talk.

If you’ve previously been married, your former marital status and the presence of children could affect your combined financial picture significantly. For instance, under certain circumstances, an ex-spouse may be entitled to some or all of your retirement benefits (if a Qualified Domestic Relations Order is in effect). An obligation to pay alimony and/or child support can also significantly impact current and future income. You should also discuss your intentions regarding financially helping your kids with future expenses such as college or a first home. Will that help be an individual or a joint effort?

Check with an attorney to determine how remarriage affects your child support agreement. In addition, you should determine if remarriage affects child support obligations that you pay and/or receive.

A serious problem that can rear its ugly head is shared debt with a former spouse. Even if a divorce decree split debt down the middle, if one debtor reneges on the deal, the other might still be held responsible. In other words, if you or your new spouse has a debt-ridden ex-spouse, old debts may come knocking at your door.

If one or both of you owns property, it is important to decide if you will add the other spouse to the title. You may want to sell property before your marriage to avoid excess taxation if you both own homes and plan to keep just one after the marriage. Your tax preparer can give you guidance in this area.

Check the beneficiary status on all of your insurance policies and retirement plans as soon as you re-marry. Most insurance plans require policy holders to complete a beneficiary form to change beneficiaries if they wish to prevent a former spouse from claiming an insurance payout intended for a new wife or husband. Check with your attorney as to rights to your 401(k) because generally the new spouse is entitled to the proceeds at your death, unless that spouse officially waives the benefit. Check to see that your levels of insurance coverage are adequate to provide for you, your new spouse and all dependents.

Once you’ve dragged all financial skeletons out of the closet, the two of you can decide if you are comfortable with a complete merger of checkbooks and savings accounts or if you wish to retain separate resources going into the marriage. You may want to consider a pre-nuptial agreement if one of you is entering the relationship with significant assets and a desire to protect those assets in the event of divorce.

Talk to a financial advisor to discuss ways to help protect your finances individually and as a new couple. Determine how to best save for your future goals, including a shared retirement. Professional advice can help take the emotion out of how to effectively manage your finances and achieve your dreams.

This column is for informational purposes only. The information may not be suitable for every situation and should not be relied on without the advice of your tax, legal and/or financial advisors. Neither Ameriprise Financial nor its financial advisors provide tax or legal advice. Consult with qualified tax and legal advisors about your tax and legal situation. This column was prepared by Ameriprise Financial. Financial planning services and investments offered through Ameriprise Financial Services, Inc., Member FINRA & SIPC. © 2008 Ameriprise Financial, Inc. All rights reserved.

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