by Kristen E. Jackson, CFA
March 20, 2025
As the busy spring wedding season approaches, couples everywhere are about to embark on life together – and that includes financially. Combining finances as a couple is not the most glamorous or exciting aspect of newlywed life. What’s worse, it’s widely accepted that finances can be one of the most contentious topics within a relationship. The task of combining finances is often ignored until it can’t be ignored any longer, but the process doesn’t need to be daunting. We’ve created a checklist for you and your partner to hit the ground running as a financially savvy couple.
1. Communicate Values
Before making any major changes, discuss and understand each other’s attitudes toward money when it comes to spending, saving, and investing. Knowing each other’s differences and similarities is an important first step to determining the best financial set up for your family.
2. Share Your Financial Situation
Ideally, both partners should be informed about the financial picture of their spouse. This may not need to include family legacy assets, but individually there should be some transparency for each partner. Consider sharing information on:
Assets: Identify real estate, investments, savings, and valuable items.
Debts: Look at student loans, credit card debt, mortgages, etc.
Income: Determine how income sources will be allocated to household expenses.
Credit Scores: Checking credit scores is essential, as they can impact everything from getting a mortgage to securing favorable loan terms.
3. Combining Finances vs. Keeping Finances Separate
Couples need to decide whether to combine their finances fully, keep them separate, or use a hybrid approach. There is no “best practice”, and couples should determine what works best for them based on how much involvement, independence, and overall control each person desires. Regardless of the set-up, it is important for both partners to have knowledge of asset location and online login information in the case of an emergency or death of a spouse, even if only one spouse assumes responsibility on that account.
4. Draft or Update Estate Documents
The Will: If partners do not have wills prior to marriage, they most certainly should draft them once married. If a will already exists, it should be updated to reflect the new marital status. Partners may wish to name their spouse as a beneficiary of all or some of their estate in the case of their unexpected passing. The will can be updated at any time as circumstances, families, and wealth changes.
Power of Attorney and Healthcare Directives: Assigning power of attorney and establishing healthcare directives ensures that someone is named to make important financial or medical decisions if one partner is unable to do so.
Trusts and Inheritance: For couples that have significant assets, they may want to consider trusts to avoid probate and potentially reduce taxes in the future.
Prenuptial and postnuptial agreements: No one wants to think about a relationship not working out, but when certain conditions exist, these documents are worth considering and consulting with an attorney to discuss options. When significant wealth, business interests, previous marriage or children, large debt or legacy family wealth are involved, these documents can provide clarity, set expectations, and protect a family in the case of a future divorce.
5. Investments: Long-term Planning, Retirement Accounts, Individual/Joint Accounts
Long-term Planning: Once the honeymoon dust has settled, discuss long-term goals and financial dreams and get started making them a reality. Having confidence in a roadmap for spending, saving, and investing can reduce potential financial stress in a relationship and foster open communication when challenges arise.
Update Retirement Account Beneficiaries: If partners want their new spouse to inherit their retirement funds (IRAs, 401ks, pensions, etc.) upon passing, they must update the beneficiaries on each account separately. These types of accounts do not flow by the will, and this task is very commonly overlooked.
Investment Strategies: Building wealth outside of retirement accounts is important and provides access to savings before retirement age. It may involve joint and/or individual investment accounts for long-term growth, emergency savings funds for short-term surprises, and eventual savings for children. Couples should discuss differences in risk tolerance and may wish to work with an advisor who can strategically align investments to suit each partner and recommend account types that help meet their goals.
6. Insurance Coverage
Health Insurance: Couples should review both health insurance plans to determine which offers the best coverage for their needs and budget. Many couples opt to combine under one partner’s plan, but remaining separate is becoming a more common as corporations change their coverage policies.
Life Insurance: Couples may need to update or increase life insurance policies to protect one another in case of an unexpected event. These policies require you to name a beneficiary who will receive the policy benefits. Similar to a 401(k) or IRA, the life insurance benefits will not flow by will.
Disability Insurance: For couples who rely on both partners’ incomes, it’s important to ensure adequate disability insurance coverage in case of illness or injury.
7. Tax Planning
Marriage changes the way couples file taxes, so understanding how to optimize their tax situation is crucial:
Filing Status: Couples will need to choose between filing jointly or separately. Filing jointly generally provides more tax benefits, but there may be exceptions depending on certain financial circumstances.
Tax-Advantaged Accounts: If couples are contributing to tax-advantaged accounts, such as IRAs, 401(k)s, and HSAs, they should keep track of contributions for tax time to minimize tax liabilities and maximize deductions.
8. Consulting with Professionals
Since marriage often brings complex financial matters, it may be beneficial for couples to consult with financial advisors, tax professionals, or attorneys. Advisors can become trusted partners for families and offer tailored advice based on the couple's specific situation, particularly if they have significant assets, business interests, or other complexities.
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