Love and marriage can go together like wealth and mergers ”¦ especially the second time around. Or if you”™re talking the blooming of young love, then the matrimony equation can be more like love plus student debt.
With spring being one of the most popular seasons to say “I do,” it might also be a good time for the two lovebirds with significant nest eggs to come to the table and talk money up front before tossing the tables in case something doesn”™t work out ”” whether the couple starts out in the black or in the red.
First, let”™s look at those who have been down this garden path before. Putting two families together can be tough enough. Add money to the equation and that can increase the degree of difficulty. To do this correctly you really have to negotiate excellent prenuptial agreements. Now I know that sounds like talking divorce before the rings are even exchanged, but it”™s better to test trust up-front than argue over residences and other assets when ugly emotions are hovering over the proceedings. It just makes sense, and will save you dollars and additional headaches ”” just in case.
Issues to think about: one-third of those getting married each year have walked down the aisle before.
With that in mind, if you don”™t work things out up-front for you, do it for the children and grandchildren.
Think about their inheritance and their financial future. College isn”™t getting any cheaper and young people today are struggling with down payments on homes. Why not make the road less bumpy for them if the wheels come off your marriage carriage.
Don”™t want the kids to be “trust fund babies”? How about considering charities as beneficiaries?
Everybody seems to be doing it these days from technology moguls to rock stars. Pick a charity or two, or three, which could do some good for something near and dear to your heart, in case your sweetheart isn”™t so kind.
The primary residence could be a sticky issue both entering and exiting a wealthy marriage merger. Do you live in a house once shared with an ex-spouse? That”™s a lot of fingerprints and memories to erase.
If kids move in as well, and it”™s a significant moving distance, where do you spend the holidays? When it comes to real estate, this might be a good time to balance liquid vs. nonliquid assets. For instance, real estate costs money to run and the money trail runs downhill from a portfolio into real estate. You need to consider the tax implications of withdrawing from portfolios that are tax-deferred vs. open accounts.
Now some advice to the young people as they get together in holy matrimony: Air all that dirty financial laundry now. Student loans, credit cards and other debt have grown enormously for millennials and most of these debts are not even discharged in bankruptcy. It”™s important to be open and honest with each other about how you and your partner will handle your finances. Combing your balance sheets and your income statements, including liabilities, is something that everyone should understand before saying “I do” and signing that marriage certificate.
Ask yourselves how you would prioritize the use of any excess cash flow. Would you build an emergency fund? Would you invest for the future or big purchases? Would you put it toward reducing your debt?
Credit ratings are also important because they tend to follow people around for a very long time. This can be an issue if you have your hopes and dreams set on a little white house with a picket fence and your partner”™s credit score is 350.
Starting a new household is also very expensive ”” and that goes beyond the cost of real estate. After you have returned or cashed in all of your wedding gifts, you then need to use those credits to furnish your house and your life (notice how I didn”™t say lifestyle). Typically how and where you live changes after marriage. Moving is expensive, so it also pays to have a cash fund that allows you to pay security deposits on everything from rentals to phones to Internet access ”” especially if you met watching “Game of Thrones.” Which leads to the next point: Be very careful with your credit. Buying a large-screen TV on a five-year payment plan is typically a recipe for disaster. The TV will not even be paid for before it is completely obsolete and worthless because of the latest and greatest in new technology.
Who pays for what ”” and when ”” is the big question here. They say money can”™t buy love but when it comes to affairs of the heart, its good advice to have your financial affairs in order before the M&A so it doesn”™t turn into divide and conquer.
Joe M. Cox, II is senior vice president, director of wealth advisory services at Webster Wealth Advisors, Inc. reporting to Webster Private Bank. Cox, who lives and works in Fairfield County, recently made the list of Top Financial Advisors according to the Financial Times, which named him as one of the Top 400 leading financial advisors in the country. As an Investment Adviser Representative of Commonwealth Financial Network, he holds FINRA series 7 and 63 as well as life, health, and accident insurance licenses. Cox has more than 30 years of experience in financial planning and wealth management. He can be reached at jcox@websterbank.com.
