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marriage financial planning

Newlywed Bliss!

The first few months of marriage – often referred to as “the honeymoon phase.”, – are characterized by congratulations, tropical vacations, and newlywed bliss. But with the bachelor and bachelorette days behind them, many couples also find themselves venturing into a new version of adulthood. With a shared home, shared bills, and shared responsibility, the need for financial planning has never been greater.

Part two of our Newlywed series summarizes a few of the many financial planning items that newlyweds should consider to start their marriage off on the right foot. For financial planning that a couple should implement before tying the knot, please see part one of our series Financial Planning for Couples Before the “I Do.”

After the Honeymoon

1. Estate and Legal Documents

A critical step that a couple can take to protect their new family is to create an estate plan. An estate plan is a collection of legal documents that protect an individual’s assets, specify who will make decisions in their absence, and determines what will happen to their assets upon their passing. Estate plans can range from very simple to highly complex, depending on the couple’s family, financial, and personal circumstances. At a minimum, every individual should have:

– A Will to indicate where their assets will go at the end of their life and who will carry out their wishes
– A Financial Power of Attorney to define who will manage their financial affairs if they are unable to do so
– An Advanced Medical Directive to specify who will carry out medical decisions on their behalf

Once estate documents are in place, the last step in this process is to determine and update beneficiary designations. Life insurance, annuity contracts, and retirement accounts typically pass outside of the will. These assets need to be reviewed and updated separately from the estate documents to ensure distribution according to your wishes.

2. Financial Goal Planning

Now that the serious (and sometimes somber) business of estate planning is complete, it’s time to dive into something a little lighter – goal planning. In the early months of marriage, newlyweds should take an opportunity to define a shared vision for their wealth, their career, their family, and their legacy. Use this time to discuss and implement a plan to bring that vision to reality.

Newlyweds should discuss career and retirement prospects, visions for raising children and funding their needs, goals for large expenditures (homes, college education, etc.), and even family support and gifting.

Once the goals and vision are determined, it’s time to implement and monitor a savings plan. Ideally, both spouses should be involved or familiar with the matters that impact their financial plan. Even if only one spouse takes the lead in the ongoing tasks of bill paying and investing, each should have a basic knowledge and understanding of the family’s finances and recordkeeping.

3. Postnuptial Agreements

In part one of this series, we discussed the importance of prenuptial agreements as a risk mitigation tool. Both prenuptial and postnuptial agreements empower couples to protect their assets and dictate the disposition in the event of death or divorce. In situations where the couple didn’t prepare a prenup before their marriage, a postnuptial agreement is a great tool to address the needs and circumstances of the couple.

While the documents sound similar on the surface, it’s important to note that in most states, prenuptial agreements are considered more valid and enforceable in a divorce because they are legitimized while two individuals are still financially separate and independent. The moment that the couple utters “I do,” many assets become marital property even if the title of the assets remains unchanged. These might include retirement assets, stock options earned during the marriage, and real estate purchased after the nuptials. Bearing that in mind, a postnup offers significantly better protection than no agreement at all.

A postnup can also address significant changes in circumstance (inheritance) or if previously unknown knowledge about one spouses’ financial situation surfaces.

Happily Ever After

Financial planning is fluid and ever-changing. Estate documents, pre/postnuptial agreements, and financial plans are not set-it and forget-it matters. Review your legal documents and financial plan on an ongoing basis, especially if you experience a significant change of circumstance (new family members, loss, inheritance, etc.). Here’s to Happily Ever After.

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