If you’re married, yeah. If ‘it’s complicated’… then it’s REALLY complicated.
If you’ve recently gotten married, or you’re just about to (or you did long ago, but have recently started arguing about this), you’re gonna have to answer the big money question: Should you and your partner get joint accounts? The answers are both straightforward and complicated, so with some help from James Conole, a financial adviser with Root Financial Partners and a member of the XY Planning Network (which focuses on financial planning for Gen Xers and millennials), we’re going to break it down.
Is this something couples are generally excited about doing?
Well, not really — it’s more out of necessity. As Conole explains, “Oftentimes opposites attract, and you tend to have one partner who might be more into numbers or likes to look at spreadsheets, and the other partner couldn’t care less and hates thinking about money.” Basically, people seldom have the same view and the same goals when it comes to their cash, says Conole.
What’s the biggest reason for doing it?
This comes down to another facet of money and marriage: Conole claims that 63 percent of married couples think their partner overspends. The only consistent way he’s found to remedy that is to create a budget together, and the great thing about joint accounts is that it keeps things more organized and more efficient. You can track everything coming in and going out — bills, rent, loan payments, income, etc. Once you figure out how much the basics cost every month, Conole advises couples to set aside a bit of no-questions-asked, fun money for each person — money they don’t have to answer for to their spouse.
But the even bigger reason is more philosophical: If you’re choosing to spend your lives together, ideally you’ll have shared goals and be working toward a future for the both of you. You’re with this person till death — why hide resources from each other? There are also some legal reasons too, in case your relationship goes south (more on that later).
Are we talking checking and savings accounts, investment accounts, or what?
Yes, ideally you should get a checking account and a savings account together (they can be any type, from any bank, as long as they suit your needs). Same with investment accounts: I mean, you’re probably saving for things together — sending your kids to college, planning for your retirement together, and all that — so it might as well be a joint account. “It’s not often I see couples come in and say, ‘Here’s his retirement plan… and here’s my retirement plan,’” says Conole.
One thing about retirement accounts: IRAs, Roths and things like that are always registered to one single person (however, there’s room for beneficiaries on there, who would ideally be your spouse).
Speaking of which, what happens if one of us dies?
That’s another good thing about joint accounts: In estate planning, the default setup for married couples is called “joint tenants with rights of survivorship.” This means that whatever’s in the account will automatically go to the other account holder (the one who’s still alive). It can get a lot messier with individual accounts, Conole says, especially if the spouse isn’t listed on it — it then goes to probate, which is a long, lengthy process where the court determines who gets what. Eventually your spouse will likely get it, but they’ll potentially pay thousands of dollars in probate fees and have to wait a year or two. It’s just a bunch of needless hoops to jump through.
Also, what about divorce? (Asking for a friend.)
It depends on the state, but in California and several other states, most everything is split 50/50 (in other states, the courts or some other mediator will divvy up yours and your spouse’s assets, maybe 70/30 or whatever). In any case, keeping your money separate won’t benefit you. It’s probably worth noting that the parties have the first say in splitting up assets and can agree to whatever they want to — the 50/50 rule only comes into play when the courts get involved.
What about the money I made before I got married?
You may want to think twice about making that one a joint account, friendo. If you end up getting divorced, you have a much better shot at holding onto anything you made prior to getting married. After that, most anything you make or purchase from the time you got married is up for grabs in a divorce.
But here’s the catch! Say you have significant savings before you got married, but then after you get married, you keep putting money into that same account: Your spouse is now entitled to half of that (at least in California and about 10 other states). Best to keep it to yourself, don’t put any money into it and open up a new — yes — joint account when you get married.
Are there, like, tax or loan implications?
Nah. And with a mortgage, if you apply for one and you’ll both be on the title, you each have to list all your savings and accounts anyway.
What about unmarried couples, or people who don’t believe in marriage? Should they get a joint account?
“I would discourage it before people are married,” Conole says. “There’s not a lot of benefit to it, and the downside is pretty severe. It’s ugly, and there’s fighting over who gets what, so it’s kind of like you’re getting a potential headache without any upside.” Conole does say that if people are committed to spending their lives together and are in it for the long haul, and want to work toward the same goals, it’s okay. But if you’re not sure, then absolutely do not get joint accounts together!
In short, Conole says that he encourages any couple to talk about money, decide who pays for what and what your goals are. But once you’re married, getting joint accounts is a no-brainer, even if most people aren’t that enthused to do so. Money is obviously one of the leading causes of divorce, but with some planning (and more importantly, sticking to the plan), it’s a little more preventable.
Adam Elder is a freelance writer in San Diego. He last wrote about jumbo mortgages.