Mixing Romance and Finance: Commingling and other Important Money Decisions for Couples

With Valentine’s Day approaching, having frank discussions about household finances may not seem like the most romantic topic. On the other hand, poor communication around money—and the stress that often comes with it—is the single topic most couples argue about. And let’s face it: recurring arguments drain the joy out of almost any relationship. Especially when both partners earn significant income or for those with more complex financial situations, clear communication around matters like marital property vs. separate property (i.e., whether to commingle property or not), debt and the responsibility for paying it, and other financial issues is vital for the ongoing health of the relationship

Even if you don’t live in a community property state, it’s important to be clear on the difference between joint marital property and separate property. Most assets acquired during a marriage are legally considered to be equally owned by both spouses, even if one spouse earns a disproportionate amount of the household income. On the flipside, debt accumulated during a marriage is generally considered to be the joint responsibility of both spouses. For these reasons, if no other, couples owe it to each other to practice open communication about household income and expenses.

Separate property, on the other hand, encompasses assets that are owned by only one spouse. Typically these would be assets acquired before the marriage or an inheritance received during the marriage. Often, those going into a marriage with significant assets are well advised to use a pre-nuptial agreement that specifies the understanding of both partners that certain property held by one spouse is not joint or community property.

There are advantages and disadvantages to both commingling property and maintaining certain assets as separate property. Commingling offers the benefit of emphasizing goals you share as a couple. It can make budgeting and recordkeeping easier. When children come along, the communal aspect of sharing finances can contribute to the family’s focus on nurturing and providing for the next generation. Commingled assets can also reduce feelings of inequality that can arise when one partner feels as if they are “carrying all the weight” or, on the other side of the coin, feels as if they aren’t contributing meaningfully. When all the assets are “ours,” it can promote everyone’s sense of ownership and belonging.

On the other hand, keeping some assets separate can also be a good idea. Sometimes, it’s important to a partner’s sense of independence to have assets that can be utilized without consultation or permission (this can especially be the case when both partners are producing substantial incomes). Partners who are otherwise well-suited for each other may differ significantly over investment strategy, in which case having “my money” and “your money” can be a good solution for keeping the peace.

For those who decide to maintain separate property, it’s important to maintain true separation between those assets and marital assets. Let’s say that one spouse inherits an investment account that pays interest and dividends. The earnings from the account should be deposited in a separate account rather than one owned jointly by both spouses in order to avoid creating the appearance of commingling of the assets, which could potentially lead to the inherited funds being declared community property.

There’s nothing wrong with one or the other partner in a marriage being the “money person.” Nevertheless, the other spouse should have at least a working knowledge of household income, bills that have to be paid, and other day-to-day financial matters. If there is separate property owned by one spouse or the other, this should be transparent and understood by all concerned.

In our work with women in transition—both those going through divorce and those recently widowed—we often need to help them come to grips with some harsh financial realities that could have been much less stressful if they had been better informed during their marriages. In other words, if you really love someone, you owe it to them to have open, clear discussion about household financial matters, and if you’re the one who feels less knowledgeable, you owe it to yourself and your partner to start asking questions and listening carefully to the answers. Bottom line: honest communication is your best ticket to lots of happy Valentine’s Days in the future.

Stay Diversified, Stay YOUR Course!