The Right Way to Mix Money and Marriage
Marriage and money can be a tough mix for any marriage. Complications only increase when you enter wedlock with kids, homes and property from prior marriages.
Is there a prenup?
Financial adviser Suze Orman has said that everyone should have a prenuptial agreement, calling it “a sign of incredible trust and financial openness.”
To put it politely, this statement is hogwash.
A prenuptial agreement is a legal document whose purpose is to divide assets in the event of divorce. Calling it a “sign of incredible trust” is oxymoronic. These agreements are also expensive, typically costing several thousand dollars and up.
That being said, there are at least two instances when you do need to consider a prenup. One is when one partner comes into a marriage with a great deal more money than the other. Another is a second marriage, especially if there are children from a previous marriage.
As Sara and I were putting together our prenup, I was also putting together a new will. This is super-important, especially in second marriages.
Why did I need a new will? First, my old one still had my former wife inheriting the bulk of my estate, something I’d let slip. In addition, I needed to make sure in the event of my death that my property would go where I wanted. In my case, that was primarily to my new spouse, but in many second marriages, that’s not the case.
Example: Say you are a woman who inherited your mother’s silver, which she inherited from her mother. Upon your death, you want that silver to go to your daughter. Now, you enter into a second marriage with a man. Three weeks later, you die without a will. As your spouse, your new husband automatically inherits the silver. While he’s free to give it to your daughter, he’s also free to take it to the pawnshop and go play the ponies.
There’s a lot of opinions out there about how couples, married or otherwise, should conduct their finances. Some say if you share a bed, you should share a checking account. Others say keeping your money separate keeps you together. Then there are those espousing a hybrid approach, with some accounts commingled and others separate.
Which is best? You tell me.
In my case, Sara and I have no commingled accounts. We have our own checking accounts, credit cards and savings accounts. Her car is in her name, mine is in my name. When she wants to buy something, she does, and I do likewise.