Itās an exciting weekend in the Morris household. My youngest son is getting married to a wonderful woman he met years ago in college.
Both have had good careers and each of them has done quite well financially, with a significant portfolio and money in the bank.
When I was married a lifetime ago, finances werenāt a very big issue because there wasnāt a lot of money to be concerned about. With my son and soon to be daughter-in-law, rather than calling it a wedding, I kiddingly refer to it as a merger.
Several weeks ago, they asked me how I thought they should handle their finances once they were married. There really is no right or wrong answer, but my feeling is that newlyweds should work toward consolidating their monies.
Rather than having two individually owned bank accounts, I believe that a married couple should work toward having just one. A joint account. I say this because if you canāt be honest with one another about your money, thereās a good chance your marriage is headed for trouble. Successful marriages are about openness, not keeping secrets from each other.
Merging investment accounts, on the other hand, is a little more difficult, primarily because of various issues regarding taxes. Nonetheless, I believe these accounts should also be consolidated, even though it might take some time wading through paperwork.
Then there are retirement accounts, which have only one owner. Iāve often had to remind people that IRA stands for Individual Retirement Account, which means they canāt be owned jointly. What you can do after getting married, however, is change the beneficiaries on all your IRA, 401(k) and 403(b) accounts.
If life insurance is part of either spouseās benefits package, the beneficiary designation should be changed to reflect the other spouse as beneficiary. Health insurance and other employer-sponsored benefits also need to be addressed. There is no mandated timetable to complete these tasks, but they should be taken care of before too long.
A few years ago, there was an article in one of my financial journals about a court case involving a deceased teacher. When he began his teaching career he was single and named a sibling as beneficiary on his retirement account. He later married and continued his career as an educator, contributing into his retirement account every pay period.
Unfortunately, he either forgot or never considered changing the beneficiary designation to his wife. When he passed away, she brought the matter to court because she felt the money rightfully belonged to her. But the court ruled in favor of the brother, the beneficiary of record.
Thatās why itās vital to make sure all your beneficiary designations are exactly the way you want them. Remember, even if you have a trust, your signed beneficiary designations with investment firms supersede the trust document.
In other words, when it comes to your finances, every minute detail should be considered and acted upon.
Over the course of a marriage, a lot of financial decisions will be made. I think itās best if you make them jointly. Many marriages falter due to financial disagreements. Based on my lifelong experience, this is often fueled by lack of communication. Most successful marriages feature couples that are open and plan their finances together.
E-mail your questions to [email protected]. Ken is a Registered Representative of LPL Financial. Ken is Vice-President of the Society for Lifetime Planning. All opinions expressed are those of Ken Morris. LPL and Society for Lifetime Planning are independent companies. Securities offered through LPL Financial, Member FINRA/SIPC. Investing involves risk including loss of principal. No strategy assures success or protects against loss.
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