How to Start Happily Ever After…

AnneBednarz_175x219

Your wedding day was beautiful, you married your one true love, and everything was perfect. You are back from your honeymoon, and reality is setting in. How do you proceed to finalize all the remaining details to start your lives together, things like name changes, employee benefits, and estate planning?

Name Change

Will you be changing your name? Traditionally, one spouse takes the last name of the other spouse; however, it is not required. When I got married a few years ago I used a checklist2 from theknot.com as a starting place for what I needed to do to change my name.

But whatever you decide, make sure that you follow the requirements for your state since each state’s laws differ. Most states require that you have your marriage license/certificate prior to any changes. It may take up to six weeks up from filing for your marriage license for you to receive it.

Places to change your name:

Employee Benefits

Employee benefits should be considered at this time. Marriage is a qualifying life event that allows you to have a special open enrollment period (normally 60 days) to add your spouse to your employer benefits for health insurance. Whether you are both employed and have benefits to look into, or one of you has benefits for the other to be added to, it’s a great time to review what is available. If you both have health benefits, you can have primary and secondary insurance if it makes financial sense or change over to your spouse’s plan.

Other employee benefits to consider reviewing if they are applicable:

  • Life and disability insurance (Do you have dependents to care for now?)
    • Review terms
    • Update beneficiaries for life insurance
  • Child and elder care benefits
  • Retirement plans – look to maximize benefits and update beneficiaries
  • Other available options through cafeteria plans

Estate Documents/Update Beneficiaries

Each major life event is an optimal time to review and update your estate plan. Review and update any beneficiaries on retirement plans, life insurance, or other investment accounts. Accounts that have beneficiaries listed do not go through probate, and your will does not determine who receives the assets unless you list your estate as the beneficiary.

If you do not have any estate documents such as a will or power of attorney, this maybe a good time to consider having them drafted and executed, especially when there are dependents involved. An attorney will help you answer the necessary questions and draft the documents for you.

Many couples also seek legal counsel for post-nuptial agreements as a precaution in case things don’t work out in the marriage, particularly if either spouse comes into the marriage with a significant amount of property or an uneven earning potential. If needed, ask your personal financial planner for a recommendation.

Common Law Property vs. Community Property

Most states are common law states, which in layman’s terms means that marital property remains separate unless you title it differently. However, there are nine states that are community property states (show in blue below — Alaska is an optional community property state1).

5.b After-Marriage_AB - Image file.

Community property means any property acquired during the marriage is owned jointly. This would include work income and investment earnings. Property owned prior to the marriage such as inherited assets or gifts received is generally considered separate property. It is a common practice for individuals in community property states to keep any separate property that was either obtained prior to the marriage or received as a gift/inheritance during the marriage in separate accounts in their individual name.

Misc.

Another topic to discuss, if you haven’t already, is the management of household expenses. Will the responsibility be split or will one spouse take on the majority of the responsibility? Will your accounts be comingled or separate?

Student loans are usually a topic of discussion in terms of the best way to pay them down. By consolidating the loans you would strip away necessary characteristics that could qualify the student loan for forgiveness later in life. Proceed cautiously when looking to combine debt, and consult with your financial planner as to the best way to reduce debt.

Also, in this day and age many, if not all, of our accounts have a way to access them online. It may be helpful to use a password management system to help keep access to your accounts available to each other. Especially if one of you does the management of household accounts or expenses on a frequent basis, you want to make sure your spouse has access just in case something happens to you and you are unable to access the accounts.

May you each learn to live with each other’s quirks and enjoy each day with one another. Who knows what this adventure will hold for you?

Disclosure: This list is not exhaustive, but a basic starting place to combine separate financial lives.

Feel free to contact Anne Bednarz, CFP® with any questions by phone 806.747.7995 or email: ABednarz@EK-FF.com

1 Bishop, S. (n.d.). Dividing Property in Alaska. Retrieved December 27, 2016, from http://www.divorcenet.com/resources/divorce/marital-property-division/alaska-divorce-dividing-proper#

2 Black, A. (n.d.). How to Change Your Last Name After the Wedding. Retrieved December 27, 2016, from https://www.theknot.com/content/name-change-101#ixzz1tAKgylOu

3 Change or Correct a Passport. (n.d.). Retrieved December 27, 2016, from https://travel.state.gov/content/passports/en/passports/services/correction.html#Changes

4 Change Your Name with the Texas DPS & DOT. (n.d.). Retrieved December 27, 2016, from https://www.dmv.org/tx-texas/changing-your-name.php

5 Perez, W. (n.d.). Community Property States. Retrieved December 27, 2016, from https://www.thebalance.com/community-property-states-3193432

6 Social Security. (n.d.). Retrieved December 27, 2016, from https://faq.ssa.gov/link/portal/34011/34019/article/3749/how-do-i-change-or-correct-my-name-on-my-social-security-number-card

You’re Engaged! Let the planning begin…

AnneBednarz_175x219

Anne Bednarz, CFP®, AIF® Financial Advisor

Congratulations on your upcoming marriage! It’s an exciting time in your life, with a new chapter to begin with your love and your lives together. Let the planning begin for the big day; it is also a good time to tackle a topic that will affect you long after your wedding day. This is an essential time to discuss your finances. Where are you currently? Where will you be after your wedding day? What are your long-term goals for the next five to ten years and beyond? By setting the tone prior to your wedding day and knowing what your goals are, you can work together as a team to accomplish them.

Where are you each currently?

How much do each of you bring to the marriage? Is it in a bank account, a retirement account, other assets, or debt? Bring it all to the table so each of you knows exactly what you’re stepping into. What are your spending habits? Do you live paycheck to paycheck, or are you a saver? Often opposites attract, so this could be an important discussion point for you.

Do you live in a common law state or a community property state? (Community property states are Louisiana, Arizona, California, Texas, Washington, Idaho, Nevada, New Mexico and Wisconsin.) This is particularly important for those in community property states. Anything that you own prior to marriage will remain your own in a community property state, and anything that is earned, purchased, or comingled during the marriage could be considered joint property. Will you keep these assets separate or combine them?

If you bring debt to the table, what type of debt is it? Do you own your own business and have business debt that you are personally responsible for, or do you have consumer or student loan debt? If it is student loan debt, there are several ways to approach how to pay it off, and a personal financial planner can help you understand the best way for you and your spouse to approach it. Some types of student loans can lose their potential loan forgiveness characteristic if not treated properly. Tread carefully.

How to conquer everyday living

How will you approach your everyday living situation… will you divide and conquer, or will you both take it on jointly? This is also a good time to sit down and make a joint spending plan. What items are essential for each of you beyond basic living expenses?

There are several approaches when setting up your finances together:

  1. You can combine everything and have a joint account from which you both spend.
  2. You can keep separate accounts. Each of you is responsible for one-half of the bills, or depending on earnings, keep it proportional to the income you earn.
  3. A combination approach. Have a joint account to pay for the basic joint bills, utilities, rent/mortgage, insurance, etc. Then have your separate accounts to pay for any separate debt obligations, or separate spending money for what you consider essential.

It is also a good idea to set boundaries for what amounts are okay to spend without seeking your spouse’s consent versus making an expensive purchase without consulting your spouse and possibly damaging your financial trust. As many of us have read, the divorce rate in the US is roughly 40 to 50%,1 and a common issue is money. If one of you handles the money most of the time, then set aside a time each month to review what is happening so you both are in the loop.

Future Goals — Do a little dreaming…

What would you each like to accomplish in the future? Write down the goal, the amount it is expected to cost, and the estimated time horizon. Revisit your goals each year, and modify them as needed. Life happens, and the best laid plans get interrupted, but being able to adjust and move on is essential in life.

For example:

Year 1:

  1. Start retirement savings accounts.
  2. Maximize the amount that your employer contributes.
  3. Set up an adequate emergency fund.
    1. 3–6 times your monthly expenses
  4. Set up a debt reduction schedule.

Year 3: Pay off all your student loan(s) by your third anniversary.

Year 5: Purchase your first home for $X.

Year 10: Purchase a boat or recreational vehicle for $X.

As uncomfortable as it may be, it’s also a good time to discuss your current financial situation now, rather than later. You will both be able to have a better understanding of where you were coming from and where you are going in the future. Enjoy your engagement and prepare for your life together.

Feel free to contact Anne Bednarz, CFP® with any questions by phone 806.747.7995 or email: ABednarz@EK-FF.com

1 American Psychological Association: Marriage & Divorce, http://www.apa.org/topics/divorce/