conley6.gif (2529 bytes)


Conjoining finances
To join or not to join - that is the question


February 2016

Bank accounts, mortgages, credit cards, investments accounts ó in most cases, couples automatically join their finances soon after marriage and then begin filing joint tax returns within the first year of marriage. But for older, more independent adults or those coming into their second marriage, joining finances (or not joining finances) is more complicated and something that should be discussed and studied with a competent financial planner.

According to Julie Ellenbecker-Lipsky, president and wealth adviser at the Ellenbecker Investment Group, there are pros and cons to cojoining finances. "On the pro side, joining finances ensures that the couple has aligned their financial values and goals. It provides confidence for both spouses in terms of financial security. Understanding each otherís finances will also be valuable if one spouse becomes disabled or unable to make financial decisions," she says.

Jim Marshall, president and founder of Spectrum Investment Advisors, says that cojoined finances make things easier when it comes to managing budgets, paying bills and planning for the future. "From an estate planning perspective, cojoining finances is a useful tool. If one spouse dies, the assets pass seamlessly to the surviving spouse without getting held up in probate. By sharing money, couples are able to share control, which can lead to positive outcomes, and they gain more trust in each other when their assets and debts are pooled. Itís no longer Ďyoursí or Ďmine,í but Ďours,í" he says.

Keeping money separate also has its proponents, since it allows for autonomy with spending as well as financial independence. Ellenbecker says that in her experience, older and more financially independent adults tend to take this approach. "Keeping assets separate makes estate-planning conversations less complicated and provides comfort to adult children who might not understand their parentís new spouseís financial situation. It might make sense to keep assets separated that are earmarked for specific beneficiaries or specific purchases. Inherited assets are often kept separated for estate planning purposes," she says.

Research seems to show that pooling money in marriage makes a relationship more likely to last. A 2010 study funded by the nonprofit National Center for Family & Marriage Research found that "results show a strong association between moving money out of joint accounts, and consistently keeping money separate, and couple breakup."

For many, the solution is a mix of the two. According to a survey of 1,000 Americans carried out by TD Bank, 42 percent of those in a relationship who have joint bank accounts also maintain individual accounts. Many use what is known as the three-pot system of couple finance ó spouses keep their separate savings accounts for discretionary spending, and they open a joint account where they both contribute to collective expenses like rent and utilities. The three separate pots have the advantage of allowing the couple to ease into cojoining finances at their

own pace.

In the end, Marshall says there is no cookie-cutter solution. "Each couple should discuss what is best for their situation," he stresses, noting that while cojoining finances is often easier when it comes to budgeting and bill payments, it isnít for everyone. "Many couples prefer to keep their finances separate. If they decide that itís best for the relationship to keep everything separate, then thatís the answer. If a compromise canít be reached, it may be a good idea to combine some finances and keep others separate," he says.


This story ran in the February 2016 issue of: