By Brandon Miller, CFP–
By her eighth marriage, Elizabeth Taylor was probably pretty accomplished at combining assets with a spouse. But most of us only get married once, maybe twice in our lives. So, figuring out how to handle money as a couple can be a little more challenging.
If you’re new to the plunge, here are some things to consider as your thinking transitions from “me” to “we.”
Community Property
California is a community property state, so if you’re getting married here, you should understand how that impacts you. The assets and debts you come into the marriage with are considered separate property. But most everything you acquire as a couple is community property, split 50/50 between you. (Third-party gifts or inheritances received during your marriage are yours alone … unless you mingle it with community property, such as in a joint bank account.)
This may not seem important until one of the two Ds comes into play—death or divorce. If one spouse dies, any property held jointly or by the deceased spouse becomes the surviving spouse’s property, unless other arrangements have been made in legal documents. If you are divorcing, things can get trickier. Business interests, 401(k) plans, and pensions may be community property, which means an ex-spouse could be entitled to a share of your retirement savings.
But hey, this is a column about happier times, so let’s just leave it at choose your partner wisely and understand community property laws.
Cash Flow
How you handle your money together is probably one of the biggest issues the two of you will have to negotiate. The hetero model of combining all of your money in one big pot doesn’t always work for LGBTQ+ couples, or even a lot of straight couples for that matter. There isn’t a right or wrong way to manage your cash flow, so work together to come up with something that you can both be happy with.
One system that my clients have had tremendous success with is to have a monthly allowance spread over three accounts. Set up a joint account for all shared expenses from housing to food to gas for the cars. Include insurance, health-care premiums, deposits to joint savings accounts, and such, and remember to divide annual expenses by 12 to accurately account for your needs.
Deposit that amount in your joint account each month, and divide the leftover allowance amount between the spouses. For example, if your monthly allowance is $10k and $8k is spent on shared expenses, you have $1k each to deposit into the individual accounts. Each spouse gets to spend their individual money however they wish. So, if one of you is a spender and one a saver, you both get to use your portion of the money however you want. This is an amazingly easy, yet effective, way to keep the peace and pay the bills.
Taxes
One of the reasons that we fought so hard for marriage equality is that there are literally over 1,000 laws that offer benefits and protections only to couples with an official certification of their “I do” moment. Income, estate, and inheritance tax breaks are just the start of it. You also have the option of filing taxes jointly or separately, to work things to your advantage. And as long as you are hitched by December 31, the IRS considers you married for that whole tax year, so plan your big day accordingly!
Estate Planning
Have you already created your will or power of attorney or other financial documents? Good for you, but remember to change them from an “unmarried” person to a “married” one after your boo puts a ring on it. And make sure your beneficiaries are still the people you want to receive your generosity. Haven’t done your estate planning? Do it together because it really is one of the greatest acts of love you can show your partner.
Insurance and Benefits
Would you be better keeping your current health plan or going on your spouse’s program? Could you save money by grouping coverage for your home, cars, and more with one insurer? Options like these are yet another gift of marriage.
Talking about money matters can feel intimidating, especially when you’re newly in love. But that’s also the best way for you and your spouse to minimize future money fights and capitalize on those “marriage” benefits you just acquired—the financial benefits, I’m talking about, of course.
The opinions expressed in this article are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security. It is only intended to provide education about the financial industry. To determine which investments may be appropriate for you, consult your financial advisor prior to investing. Any past performance discussed during this program is no guarantee of future results. Any indices referenced for comparison are unmanaged and cannot be invested into directly. As always please remember investing involves risk and possible loss of principal capital; please seek advice from a licensed professional. Brio does not provide tax or legal advice, and nothing contained in these materials should be taken as such.
Brio Financial Group is a registered investment adviser. Advisory services are only offered to clients or prospective clients where Brio Financial Group and its representatives are properly licensed or exempt from licensure. No advice may be rendered by Brio Financial Group unless a client service agreement is in place.
Brandon Miller, CFP®, is a financial consultant at Brio Financial Group in San Francisco, specializing in helping LGBT individuals and families plan and achieve their financial goals.
Published on May 6, 2021
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