Love and Marriage — and Money
Given that financial disagreements are the No. 1 predictor of divorce, it’s no wonder some people keep money conversations completely separate from their romantic relationships, trying to avoid the conflict altogether.
But it’s important to remember that “marriage is not just about love,” divorce lawyer Linda A. Kerns says. “It’s also a business relationship.”
Whether you’re planning a wedding or already married, it’s critical for you to understand how marriage changes your finances. You can start by recognizing some of these common misconceptions about marriage and money.
Myth: Talking About Money Kills Romance
Not only does talking about finances make your marriage stronger, says Liz Davidson, author of What Your Financial Advisor Isn't Telling You and founder and CEO of Financial Finesse, but who you end up with “could be the most important financial decision of your life.”
It’s not anti-romance to be on the same page: It’s necessary field information when deciding who to spend your life with, and it’s essential to keeping the relationship healthy and strong for decades.
Cordi Powell, certified financial planner and advisor for SUM180, suggests that couples have a monthly “financial date night” to assign money-related tasks, talk about future financial decisions, and review progress toward financial goals.
And if you aren’t yet married, it’s important to have a frank discussion about income, savings, debt, and spending before the wedding, Kerns says. “You need to understand how to manage the business side of your marriage,” she says, because it absolutely will affect your marriage as a whole.
Myth: Marital Property Must Have Both Spouses’ Names
Many people are under the impression that if something is in their name only, it’s not considered marital property and their spouse isn’t legally entitled to it. This isn’t actually the case, and the laws are different depending on where you live.
If you live in a community property state (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin), spouses are considered equal owners of everything acquired or earned during marriage, and property is divided 50/50 during divorce regardless of who earned it or whose name is on the title, Powell says. Alaska and Puerto Rico allow couples to “opt in” for community property.
In equitable distribution states (aka all the rest), if your name is on the asset, you are the owner. However, Kerns says, in a divorce, your spouse can claim a portion of any property or assets acquired during marriage, especially items that were acquired for the married couple, like a home you share. The portion your spouse is allowed to claim varies by state.
No matter where you live, you should talk to a lawyer and consider a prenup if you want to protect assets that you acquire while married.
Myth: Your Spouse’s Debt Won’t Affect You
If either spouse brings debt into the marriage, it’s important to be up-front about how much is owed. People assume that if the debt is in someone’s else’s name, it won’t be their problem, says Kerns, but that’s not the case.
Once you’re married, regardless of whose name the credit card or loan is in, all debt accrued by your spouse during your marriage will become your debt, too, if you live in a community property state, Kerns says. But even if you’re not in a community property state, expenses on family necessities — like shelter or tuition for a child — could be pegged as a marital expense, meaning you’d be on the hook.
Another common myth about debt is that if you change your name to your spouse’s when you get married, your debt is erased. “Changing your name won’t free you from debt,” Powell says, since debt is linked to your Social Security number, which never changes.
Myth: Your Credit Scores Are Combined When You Get Married
Spouses maintain separate credit scores throughout their marriage, even if they share the same last name and have joint accounts. So if your spouse doesn’t have a good credit rating, it won’t affect your personal credit score, says Kevin Gallegos, credit and debt expert and vice president of Phoenix operations at Freedom Financial Network. What will impact your score is if your spouse adds you as a joint holder of a credit card in bad standing.
But remember that while spouses have individual credit scores, your spouse’s credit rating will affect your ability to open any new joint accounts, including car loans and mortgages. If your spouse’s credit isn’t good enough to support a major purchase like a house or a car, you might want to think twice about agreeing to assume all the financial responsibility for that debt, because you could be solely responsible for payments, Powell says.
Myth: You’re Legally Required to Put Your Spouse’s Name on the Deed
Cary Carbonaro, certified financial planner and author of The Money Queen’s Guide for Women Who Want to Build Wealth and Banish Fear, married a man with bad credit, put their mortgage in her name only, and agreed to put her husband’s name on the deed. When their marriage ended, Carbonaro wanted to sell the house but found that she couldn’t do so without his consent.
“He would not move out of the house. He wouldn’t let me sell it. He wouldn’t let me rent it. He wouldn’t let me refinance the mortgage,” Carbonaro says. “He had all the rights to the house but no liability for the costs.” Avoid this by not putting your spouse’s name on the deed, she says, if you take on sole responsibility for a mortgage.
If your spouse has poor credit but wants to improve it, you can work toward adding their name to the house’s deed once their score rises, Powell says, noting that you might have to refinance your mortgage to add a spouse to the account.
But remember that marital assets and debts are those accumulated from the date of the marriage until the date of separation — it doesn’t matter whose name is on the title, Kerns says. So if you buy a house after you’re married and keep your spouse’s name off the deed, you’ll still need a prenup or postnup to guarantee that you’ll get the home in a divorce.
Myth: Married Couples Must Have Joint Credit Cards and Banking Accounts
Spouses can be added to a credit card as either an authorized user or a joint account holder, but if one spouse carries a large amount of credit card debt, they may want to keep separate accounts. Becoming a joint account holder or an authorized user can affect your credit score, and being a joint account holder comes with a legal responsibility to pay back the debt.
Many married couples choose to have separate accounts, Gallegos says, and others pool their resources. If you do open a joint credit card with a spouse who has a lot of credit card debt, your credit score won’t be affected by their debt on their other card, as long as the payments on your joint card are on time, he says. In fact, “if you’re disciplined about making payments,” he says, “you can actually help your spouse’s credit rating.”
Myth: You Must Apply for a New Credit Card if You Change Your Name
Some people mistakenly believe that once they get married, they should cancel the credit cards they have in their previous name. Think twice about ever canceling a credit card with a long, positive credit history, Gallegos says. It’s absolutely not necessary, and it could hurt your credit score. “The longer you hold a card, the more valuable it is in your credit score determination,” he explains.
A longer history of good credit means a higher score, so the last thing you want to do is shorten the lifespan of your credit, especially when changing the name on your credit account is so easy — just contact your credit card company and have the card issued in your married name.
Myth: Your Spouse Is Automatically a Beneficiary
Some states give spouses some rights to life insurance or retirement automatically, but it’s best to double check — laws differ by state.
To add your spouse to your life insurance or retirement account, you need to contact your HR manager at work or your policyholder, Powell says. You likely filled out these beneficiary forms when you were hired and never gave it a second thought, meaning your beneficiary could be a parent, sibling, child, or even an ex-spouse. (Some states automatically revoke beneficiary designations upon divorce, but Kerns recommends not relying on state law because there are too many exceptions.)
Designating a clear beneficiary also avoids probate, the legal process that governs the distribution of assets after someone dies. Probate could take a year or more, says Davidson, but if you designed a beneficiary on your accounts, that person will immediately get access to the account after your death.
Myth: Married Couples Can Make Medical Decisions for Each Other
Without an advance health directive that spells out your wishes regarding end-of-life care, your spouse is not guaranteed the ability to make decisions for you or tell your doctor what you would want, Davidson says. (You aren’t required to list your spouse on this document — you can direct anyone to make medical decisions for you if you are incapacitated.) You can set up an advance health care directive at mydirectives.com and file it electronically.