Discussing marital finances may not seem like the most romantic conversation, but poor communication around money can certainly suck all the vitality out of what may have once been a loving relationship. Especially for two-income couples and those with more complex financial situations, it’s important to communicate clearly, particularly concerning matters like marital property vs. separate property, debt and the responsibility for paying it, joint tax liability, and other financial issues that arise in many marriages.
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.
For those with separate property, it’s important to maintain separation between those assets and marital assets. For example, if one spouse inherits an investment account that pays interest and dividends, the earnings from the account should be deposited in a separate account; they should not be deposited in an account holding jointly owned funds. Doing so could create the appearance of commingling of the assets, which could potentially lead to the inherited funds being declared community property.
It is common for one or the other partner in a marriage to be the “money person.” That’s fine, but it is still crucial for the other spouse to 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 thoroughly discussed and understood.
Very frequently, as I work with women in transition — both those going through divorce and those recently widowed — I face the need to help them come to grips with some harsh financial realities that could have been so much easier if they had been better informed during their marriages. This is also true of family stewards who are trying to guide children going out on their own or, more often, to assist aging parents with getting a handle on their finances.
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 in the dark, you owe it to your partner to start asking questions and listening carefully to the answers. Honest communication is your best ticket to lots of happy Valentine’s Days in the future.
Stay Diversified, Stay YOUR Course!