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An Alliant member’s story: Managing marital finances

couple discussing marital finances and nuptial agreement
March 16, 2017

By Leigh T.

Smart money guest blogger Leigh T. shares how her nuptial agreement works and how it helped spark important financial conversations in her marriage.

Separate or combined bank accounts don't make a marriage financially successful. Communication and shared values do.  

Talking about how you’ll handle your marital finances is incredibly important. After some discussion, my husband and I went the route of a notarized post-nuptial agreement, which worked best for us. It describes each of our separate and joint pre-marriage assets and liabilities and spells out our plans for money in our marriage, while leaving us flexibility to adapt to life’s many changes.

But that doesn’t mean it’s right for everyone. While it’s been helpful for us, we certainly didn't get the idea for our post-nuptial agreement from our parents. Both of our parents are still married – 30+ years later – and have always had the one-pot approach to their marital finances. However, they got married when they didn't have much in the way of assets or incomes, so that made the most sense for them.

Of course, my husband and I didn't screen each other based on our financial status when we met, but we knew we had similar financial values (Index funds! Saving! Conscious spending!), which matters far more than our assets being at similar levels.

How a post-nuptial agreement works

If you don't have a nuptial agreement (either pre-nuptial or post-nuptial), you’re essentially accepting your state's laws, no matter how you title your bank accounts. You lose a lot of control, essentially.

For example, many states by default consider pre-marital assets to be separate and marital assets to be joint in some manner. Even if you agree with your state’s laws, a nuptial agreement can be a great way to document those pre-marital assets.

All told, the process of finalizing our post-nuptial agreement took about four months. My husband and I found our own lawyers through referrals from coworkers. I initiated the process with my lawyer, who worked with me (and my husband, behind the scenes) to draft the agreement. Once my husband and I were happy with it, my lawyer sent the agreement to my husband’s lawyer for review. After that, we all signed and notarized it. Pretty straightforward.

Our post-nuptial agreement goals

Before you start the process of drafting a nuptial agreement, you and your partner should think about what you want.

Our main goal for the agreement was to own our primary residence together, while also protecting my separate interest in the property. (I bought the condo before we started dating, and by the time we got married, I owned more than half of it.)

Also, our state’s default marital law would have kept my larger pre-marriage assets separate while sharing my husband’s larger income post-marriage, during a phase of low income for me (grad school!).

We decided that wasn’t the right option for us. Instead, we chose to keep everything separate except the condo and our joint budget. This means all of his income and assets are his to keep, and my income and assets are mine to keep, unless they’re in jointly titled accounts.

We plan to re-evaluate this when/if a big life change happens. The great thing is that if we change our minds, we can simply deposit our incomes into joint accounts, to make everything sharable (vs. separate).

Our system for marital budgeting

Our day-to-day system isn't much different from a couple that sets allowances for discretionary spending. Rather than depositing everything to a joint account and transferring the discretionary spending to separate accounts, we deposit everything into separate accounts and transfer an agreed-upon amount to our joint accounts. We're both open with how we spend our money, and we’re relatively frugal (having saved over 50% of our incomes the last few years), so we aren't doing this just to avoid disagreements about money.

We also don't want to inflate our lifestyles based on the other's income. For example, if we can't contribute 50/50 to our primary residence, then that property is too expensive for us.

Marital money and taxes

Keeping our incomes separate does create an annoying situation when we file our taxes each year, as the overall tax bill must be split somehow. If we choose to make our income joint in the future, we will likely do it on a calendar-year basis to help make the tax bill clearer. For now, we plan to split the marriage tax bonus or penalty 50/50. That requires running through two Single returns and a Married Filing Jointly return in TurboTax to calculate the split, which actually wasn’t so bad for 2016.

Also, the "default" for accounts in a post-nuptial agreement seems to be that the valuation at the time of marriage is considered separate and any new growth or contributions are considered joint. We both had substantial (yet disparate) balances in retirement accounts at the time we got married, so the default seemed to take away the value of compounding from my starting to save for retirement at age 19. We ended up agreeing that any growth in the condo value is joint and all other growth on our separate assets is separate.

Marriage and money are complicated

Marriage and money is such a complicated topic! How we manage our money is specific to our situation and won't necessarily apply to other couples. (I really do believe that the one-pot style is ideal for most people simply because most of us don't come into marriage as millionaires.)

In the end, the emotional discussions my husband and I had around money while working through our post-nuptial agreement have been an important foundation to our marriage – and our talking about money won’t stop there.

Leigh T. is a late 20-something software professional, blogging and tweeting her way through the financial journey that is life in a high cost of living area. She believes that saving isn’t a sacrifice beyond a minimum level of income – it’s a gift to her future self – and is thankful that her husband has a similar financial philosophy.

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