A Newlywed Financial Guide
What recently married couples need to think about when it comes to planning for their financial future.
April 26, 2013
The decision over whether or not to get married is one that gay couples have only had to deal with for a few years. But as the number of states extending marriage rights to same-sex couples grows, more and more of us are confronting that choice. Making the decision especially difficult, perhaps, are the many financial choices that go along with such a commitment. As long as the 1996 Defense of Marriage Act remains in place, same-sex marriages exist in a complicated legal zone where state benefits may apply while federal ones may not. In addition, gay couples face many of the same hurdles straight couples do when it comes to organizing finances and planning for the future.
For gay couples that are planning to get married, many financial advisors have two main pieces of advice: focus on the present and plan far into the future. “The best advice I could give is do not rush to join assets,” says Michael Sangirardi, a financial advisor with Bryant Park Wealth Advisors. “It takes time to understand your partner’s spending habits and psychology around money. The best way to destroy a new marriage is to create unnecessary financial stress.
Most of us come from diverse backgrounds and have very different expectations about money. For some of us money is a means to function in society and for others it can define our success.”
Shawn Cowls, a financial advisor with Hornor, Townsend & Kent, also advises newlyweds to keep at least some of their funds separate. “I’m a big believer in each partner having some funds that are their own for discretionary spending,” suggests Cowls. “We all have our own personalities when it comes to money and it’s important to respect each other’s fears and needs, particularly if one of the two people is more financially conservative than the other.”
If you do decide to cover household expenses with a shared account, one strategy is for each spouse to contribute to the account in proportion to their income. “In the case of couples with disproportionate income levels, one effective solution I have seen is for couples to contribute proportionately for bills and expenses,” writes Kate Hewell of Hewell Financial Group. “For example, if one spouse makes $200,000 and the other brings home $50,000, the higher income earner would take on 80% of the household expenses and the other partner would pay 20%.”
Even in that case, however, it’s important to keep records regarding who purchases what, especially when it comes to tax laws—such as gift tax rules—that don’t apply to heterosexual married couples. “It’s very important to be able to document who paid for what, and how much, in the event the IRS demands an accounting,” explains Cowls. “This is especially important for large assets titled in one or both names, like an apartment.”
If the dry math of contributing to a joint account based on proportional income doesn’t get you going (and if it does, you’re a lucky man), another idea you can explore with your spouse is splitting big-ticket expenses and smaller ones between the two of you. “My late partner was the richer and for trips would pay, usually in advance, for lodging and travel and I would pay for everything else,” says Brooklyn-based financial planner Arthur Goodman. “Because he did not have to ever dip into his pocket while on vacation he felt treated and taken care of while I, who was more conscious of the actual numbers, felt the same. Win/win.”
Regardless on how you decide to divvy up financial responsibilities in the present, some of the biggest financial choices you’ll have to make after getting married relate to the future, in terms of planning for a death or potential divorce. Exactly what you want to be thinking about right now!
“You need a will, a health-care proxy, beneficiaries on your retirement accounts. This should be done by a specialist who understands the complexities of same-sex marriage, not your real estate attorney who lives next door,” cautions Jennifer Hatch, a managing partner with Christopher Street Financial. “I don’t believe that most married people realize that they are legally responsible for each other’s health care. There are ways to mitigate that issue with an elder care attorney, but you are a single economic unit—for better or worse.”
And, as they say, for richer or poorer.
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