The previous article we published, 7 Financial Issues To Discuss With Elderly Family Members, was crucial to figuring out what’s important as family members get older and need to gain more control of their future. Although that article was specific to elderly family members, some of those issues are the same that couples, or those who are thinking about becoming couples, need to think about.
Unfortunately, not everyone who gets married stays married, and these days even people who don’t get married but decide to live together as a couple end up having to deal with financial decisions on the back end that they never considered. It rarely ends pretty, so thinking about things like what’s below makes a lot of sense before mistakes are made that can’t be fixed.
1. Joint Checking & Savings Accounts
Many married couples will have one checking or savings account that they share. That makes life pretty convenient, and protects one or the other long term in case something happens to the other… until it doesn’t.
The smart thing to do would be to have one account that’s a joint account where both parties put in enough money to pay bills and add a little bit extra for shopping and family life, while keeping their own checking and savings accounts separate. That way, each party can have their own money to spend however they want to, and if something happens in the future and they separate, each person will already have an established account to draw money from, just in case things end badly and one party decides to take over the joint account and close the other one out.
2. Make Sure Real Estate Is In More Than One Name
Each state addresses community property laws differently. Some states will divide assets in half no matter whose name is on it while other states recognize that if only one person’s name is on something they’re entitled to full ownership.
The last thing either party wants to have to deal with is finding out they legally have nowhere to live when things are contentious. If you get married, unless you have a pre-nuptial agreement, both parties should have their names on the deed of the house. Love isn’t forever for everyone but protecting oneself is.
Unless… if one party owned the property before getting married, it’s smarter to keep the property in that person’s name. If the couple splits, one person might own all of it but the other person isn’t liable for any debts the owner might have incurred. A will can be drawn up to pass the house on to the other party, but it’s easier to change a will if things don’t work out long term.
3. Create A List Of Debts To Pay Off
This one is slightly different than in the other article because instead of assets we’re talking debts this time. I know few couples that are ready to get married who have full knowledge of what their potential spouse might own on bills. Sometimes even with married couples, one person might not know that the other is creating a mountain of debt that both of them will be responsible for.
A joint checking account is great for paying off consistent bills, but a real discussion needs to be had beforehand about outstanding debt with the intention of getting rid of as much of it as possible. This is why we believe it’s smarter to deal with debt before investing too much money, because percentage rates on debt are higher than the interest on returns from investing.
4. Get A Lawyer, Set Up Wills
Trust me on this one; you and your spouse need a will to not only protect each other but detail what’s supposed to happen to the estate as it regards other family members, friends or charities. Most people balk at this one because it makes them think of the possibility of death. However, since no one gets out of “this” alive anyway, it’s better to be prepared for the inevitable.
If one or the other is a business owner, there’s going to be the need for another lawyer to handle the business decisions, especially if other employees are involved and you want the business to continue once you’re gone. It’ll also be a good time to talk about whether the business should be incorporated or not for long term protection, which also becomes family protection in case the business is ever sued.
5. Children
This last one could be the most important decision of them all. It’s predicted that the total cost of raising a child in America to age 18 is approximately $304,480; that’s around $17,000 a year… per child! It’s one of the reasons for paying down as much debt as possible as well as looking forward as it concerns both your income possibilities and health insurance costs (which are higher for children because they tend to need to see health providers more often).
Although the numbers are growing, the overall percentage is still pretty low, only at 23% of single child families in the country. Since financial distress breaks up more families than anything else, and the impact on children is worse than on adults, it’s a very important topic to discuss early on because waiting might be too late to get a handle on it. It’s unfair to bring children into the world if you can’t afford to take care of them.