Recently, another blogger was asking on Twitter for our opinions regarding his fiancée’s suggestion that they combine their finances. Since the wedding was not for another year, my answer was emphatically no, even if they were living together. If they were getting married in a month, I’d probably still have said no, but agreed that they should look into how they were going to combine their finances if they planned to do so after they married.
Since I hear of so many couples keeping their finances separate even after marriage, I kept thinking about his question and my biggest reasons for saying no. Many small reasons occurred to me, these two big reasons apply to any couple and are something every couple (especially those without the legal protections of marriage) should consider before combining finances:
1. One of You Might Die
It happens. I lost a friend who had just graduated from college and was on the verge of getting married. Car accident on her way home from work. Even if you’re young and healthy and in a stable and happy relationship–all of which she was–that can be taken away in the blink of an eye. Another woman I know came down with acute leukemia a couple months before her wedding, though she was still able to get married in a small ceremony and is undergoing treatment. We all hope for the best.
Death is something married couples should take seriously too–with wills and legal protections for their spouses. Unmarried couples run a greater risk, however, especially if they don’t have wills leaving everything to each other.
Suppose that you and your fiancé(e) happily live together and contribute your paychecks to shared accounts. You’re sharing the daily finances as well as saving for the future. Without legal protection, you could lose half of that money (even if you contributed more than half).
2. You Might Decide to Break Up
Couples break up. It’s unfortunate and often sad, but it happens. A married couple has the divorce process to help them split up their assets and decide what’s fair for who to get what. It provides a third party to assess their situation and enforce action.
An unmarried couple with merged finances will have to figure it out on their own. There’s also no one to enforce the agreement. And even if it’s a harmonious breakup, separating the finances will leave both parties with a headache and possibly a sense of resentment if one person feels s/he didn’t get enough money back. In fact, it may make the breakup as painful as a divorce.
Moreover, combined finances may be a reason to keep one person or both in an unhappy relationship because it’s going to be too hard and complicated to break up.
One Safe Way Fiancés Can Combine Finances
So should people who aren’t yet married but plan on being so never combine finances? I can think of one reason and one way that combining some finances might work out for a couple.
For fiancés who are living together in anticipation of getting married, it may be easier to share the household expenses if you both contribute a predetermined amount of money each month into a shared checking account to be budgeted for household necessities.
The other alternative is to split up responsibilities between the two of you. But I think there’s a good argument for each being able to pay all the bills, trade off doing the shopping, etc. This way, all you stand to lose is one month’s expenses.
If you want to save for a shared goal, such as a house, I suggest parallel saving accounts and sharing your numbers rather than combining your savings.
What about LGBTQ Couples?
One reason this topic stuck with me is that I spent the weekend visiting friends and attending the commitment ceremony of a couple friends of ours. They’ve been together for 14 years and show no signs of breaking up any time soon. Yet their state and the federal government would not recognize their marriage or civil union or allow them to either marry or get a civil union.
Should they combine finances?
Even gay couples in civil unions and marriages don’t have marriage equality on a federal level, meaning that they won’t be free of estate taxes the way other couples would and cannot use spousal Roth IRAs they way that straight couples can. This means that a couple deciding to combine finances should very carefully set up wills, powers of attorney, etc, beforehand in case their spouse becomes to ill and unable to function financially or dies.
With all these in place, it may still be advisable for LGBTQ couples (as with straight couples) to keep some money in reserve in case their accounts are frozen while a will is being executed. And until there is marriage equality, there won’t be the same divorce procedure to straighten out finances, so it may be in their best interests to keep their long-term savings separate even if they don’t plan to separate.
For more information about financial best practices for gay couples, check out Queercents and Fiscal Fitness for the Rest of Us.
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I think you make a good point about the length of the engagement. My husband and I had a two-month engagement, so we were combining our finances as soon as possible. However, if our engagement had been longer than 6 months, I think we would have waited, and combined things much more slowly.
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My DH and I combined our finances almost as soon as we were engaged as we wanted to save for our house and wedding. It works well for us.
My sister and her partner keep everything split and as she gave up work when she had her children it did cause some finance problems for her. But it works well for them.
My Mum had no clue about anything money wise so when my Dad did the dirty we found out the truth and he got off mostly scot free and she wasn’t so lucky. It worked for them until it didn’t!
Oh and I left an award for you over at mine!
My fiancee and I just combined our bank accounts on Monday, actually. We’re just over a month away from the wedding, and we knew that we were going to combine them right after the wedding. We had to go to the same location (which takes awhile to get to) in order to pick up our marriage license, so we decided to just pull the trigger while we were there.
Even after reading your post, I think I still would have, just because I’m willing to take the risk that one of us will die before the marriage. I know we’re not going to break up, at least not over the next 5 weeks. Also, its not like either of us has tons of money to stand losing anyways.
Definitely made me think though. We really should look into getting a will done post-marriage. That would be unpleasant, but necessary, I’m sure.
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If two unmarried individuals intend to combine finances, its a good idea to write up a contract of how to split them up should it be necessary. The court will usually uphold a contract between two individuals in this situation. Just be sure that the contract has all of the appropriate parts and is notarized.
While writing up a contract isn’t terribly romantic, it should give each person peace of mind that a proper exit strategy has been put in place.
I agree with Melissa. Even though the notarization will cost you a couple of bucks, it can save a hell of a lot of time and money later.
Mr. and I never really ‘combined’ finances because I wasn’t bringing anything except actual household goods to the relationship. We’ve got all joint accounts, but it’s pretty much all his money. We’ve known from the beginning that I would be working from home and being a SAHM, so we’ve agreed that he’s responsible for the household expenses and when I get a windfall from my business that doesn’t need to be reinvested I give it to him to add to the communal account.
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I’d add to Melissa’s comment that it is a good idea to keep track of the amounts each party contributes to the joint account in case it was every necessary to prove that “gifting” has not occurred. Currently, an individual can gift another individual up to $13,000 without incurring a gift tax. That includes financial support while a partner is in school or otherwise not working. Great summary of the issues Mrs Micah and thank you for the blog plug.
Hmmm that person on Twitter sounds familiar! Glad I can inspire.
With still a year til I am getting married, I am trying to hold out as long as I can on combining finances. My hope for when we do get married is we both have our own checking accounts and then one combined savings account that we funnel our money into. The scenarios of why to keep them seperate are all valid, but it just seems a a preference that is created based on the type of relationship being dealt with.
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@Miranda I think 2 months out is a less risky time to start combining.
@Pippa hi and thanks! 🙂
@Alan glad it made you think. 5 weeks out and license in hand is probably safe. Wills are good, even very basic ones that just leave everything to each other–then you can write up specifics for how you want her to dispose of your personal items.
@Melissa brilliant suggestion! Even a simple, notarized contract can make a difference.
@Frugal Urbanite that sounds like a good way of handling it.
@Carol great point about keeping track of deposits into shared accounts. Getting that periodically signed & notarized might help too, if you want to be really precise.
It boggles my mind how financial support you give your wife could be considered a “gift.” Yet it is by the feds.
@Doctor S lil’ bit familiar? 😉
I also like the shared savings model. We share checking too, but different models seem to work best for different couples & earning situations. It’s possible that in the future we’ll share one checking and each have our own private checking acct.
Well said, all the way around.
The problem with combining finances before you’re married is that there are so few legal protections if anything goes wrong. And a LOT can go wrong: one person could be killed in an accident or by an illness, both people could die in a single accident (what if one or both of them has kids? a will that leaves everything to someone else?), an ex-spouse could attach an account for unpaid support, one person could be injured or have a stroke leaving him or her incapacitated, and of course there’s always the potential for a premarital break-up. Neither party is protected in any of these events.
Worst move of all is to incur debt together, particularly a mortgage. When Semi-Demi-Exboyfriend and I lived together, I bought the house and he paid half the mortgage as rent. There was no real advantage to him, except that when we broke up he was in a position to walk without having to disentangle himself from my finances. And I was in a position to throw him out free of financial worry (except for the question of how I was gunna pay the mortgage by myself…).
We were very careful to write wills that specified exactly what would happen if one or the other of us died or became incapacitated. One provision of mine was that he would be allowed to live in the house, paying the mortgage as rent to the estate, until such time as he chose to move, at which time the house would either go to my adult son or be sold and the proceeds pass to my son. We also provided powers of attorney for each other, so that we would have a say in medical issues and in common financial matters should one of us become incapacitated.
But none of these steps approaches the protection granted by law to a married couple. I would never mingle finances without a marriage.
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