Allworth Co-CEO Scott Hanson answers a reader's question about how to handle the delicate situation of entering a new marriage with two different perspectives (and experiences) about money.
“I’m 58, divorced, self-made, pretty darn successful and (if I do say so myself) really good with money. I’m about to marry a man that I adore, but who isn’t nearly as financially savvy as he’d like me to believe (I know he has debts). What advice can you give me?”
I just looked it up, and I found that 40% of all weddings are second marriages, and that 80% of people who get a divorce eventually end up remarrying.1
You’re in good company and this is obviously an important topic.
I’m going to reply from the perspective that your fiancé is a good person with good intentions, but who just doesn’t have a lot of discipline (or training) about money.
Lots of people never learn how to manage their personal finances, but while it’s not unusual, you certainly don’t want his money habits to become your problem.
The key is that you protect yourself while maintaining an example that he can follow.
I’m going to lay out some things you should consider doing. But before that, I’m going to remind you (and our readers) that money is the #1 issue couples fight about. And these repetitive arguments lead to distance, distress, animosity, and breakups. This is a seminal moment in your relationship, and I commend you for seeking counsel.
My experience has been that the way to limit friction is to try and engage in money discussions without judgment, to speak softly, to never ambush, and to be as supportive (but not a pushover) as you can possibly be. This is not a negotiation, however; it’s a fact-finding mission. And you have every right to know virtually everything there is to know about your fiancé’s financial makeup.
But think of it this way: if the two of you can sit and speak honestly and work together, it will likely greatly strengthen your bond.
The first thing I want you to do is to make an appointment with your fiancé to discuss finances. Don’t just spring the discussion on him when you are in the middle of a walk in the park. These topics are jarring, they are intimidating, and they make people feel vulnerable. If, as you assume, your fiancé’s financial decision-making history is not up to your standard, then he’s understandably going to feel exposed.
By making an appointment to discuss this sensitive topic, you are giving him time to take a good, long look at his history. Lots of people think they are better at things than they are (or they’ve forgotten or are in denial about their mistakes or habits). Giving him time to prepare so he doesn’t feel ambushed might also help him reacquaint himself with some of the errors he’s made.
So, say it’s a Tuesday evening, and you are both ready for your scheduled meeting. Since you appear to be the one who likely has more money, you are going to have to gently reassure him that this is the time for complete and total honesty. Begin the process by taking the time to each write down the following:
Next, hand one another the papers and take a few minutes to review them.
Now comes the hard part.
If you not only have significantly more assets than your fiancé, but, worse, he has considerable debt, this is the time to clarify, first, who is responsible for those debts, and, second, if you will share either past or future assets that one of you has or will have.
As for assets you already have, I generally recommend that you keep them separate. That of course doesn’t mean he won’t benefit, as you can certainly buy things for the two of you, and, say, if you both move into your house or drive your cars, there’s that. But until you are together for a good long while, in which case, depending on whether you have other heirs (which I touch on below), you might someday want to co-mingle things, but for now, and the foreseeable future, please work to keep them apart.
Because I’ve seen literally dozens of wealthy people financially terrorized and even ruined by not carefully keeping assets separate, or, worse, by declining to take the next step, which is to see an attorney and create a prenuptial agreement.
Requesting your future husband sign a legally binding document at the exact time that you’re about to enter a marriage pact (that is, hopefully, steeped in commitment) isn’t simple or easy. You want him to know you love and trust him.
Just remember, as the years go by and your commitments and trust in one another grows, you can always agree to change the prenup. But if there’s a large gap between your financial realities, and even your sensibilities about money, and you have significantly more than he does, I would strongly recommend you meet with an attorney to create one.
Now, as for potential future windfalls or inheritances, thankfully, the laws in most states protect the beneficiary, which is terrific, unless that money gets co-mingled.
So, any inheritances that may come your way, make it clear up front that those monies are not going to be placed in any joint accounts. (Again, in time, this may change.)
Simply, promises and agreements made in the loving haze of the build-up to marriage don’t hold up in court and are, I’m sorry to say, quickly forgotten if the mood of the relationship changes. (And remember, the prenup doesn’t only protect you, it protects your heirs as well.)
After you have worked through all the possible issues related to credit history, debt, assets and possible inheritances, ensuing conversations should address things like insurance. For instance, if your fiancé doesn’t have any assets, rather than altering your will to put things in his name, you instead might want to “up” your life insurance coverage so he’s taken care of if something happens to you.
Lastly, Harper, if in fact the big financial “reveal” shows some mismanagement and mistakes, but not any deal breakers like crime (or that he hasn’t filed his income taxes since 1983), and the marriage is a “go,” all other things aside, again, wait a long, long time before ever, if ever, co-mingling your assets.
If, over the years, you live in relative bliss, there are no real setbacks, and you find that he’s gotten beyond his mistakes, you will have had your trust rewarded and even built something lasting together.
And I sincerely hope that this is exactly what happens for you both.
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1The NBRI Circle of Excellence Award is bestowed upon NBRI clients meeting one or both of the following criteria: Total Company score at or above the 75th percentile of the NBRI ClearPath Benchmarking Database and/or improvement of five (5) or more benchmarking percentiles in Total Company score over the previous survey.
2Scott Hanson (2011, 2012, 2013, 2014, 2015 & 2016) and Pat McClain (2012, 2013, 2014, 2015 & 2016). Barron's© magazine is a trademark of Dow Jones L.P. The ranking reflects the volume of assets overseen by the advisors and their teams, revenues generated for the firms and the quality of the advisors' practices.
3As of 12/20, Allworth Financial, an SEC registered investment adviser and AW Securities, a registered broker/dealer have approximately $10 billion in total assets under management and administration.
4Barron’s 2020 Top 100 RIA Firms. Barron's© magazine is a trademark of Dow Jones L.P. The ranking reflects the volume of assets overseen by the advisors and their teams, revenues generated for the firms and the quality of the advisors' practices.
✢Scott Hanson, Investment Advisor 2005, 25 most influential people in the financial services industry. The ranking reflects 25 people who Investment Advisor magazine believes have had or will have the greatest influence on the financial services industry.
✼Pat McClain, InvestmentNews 2014, Invest in Others Community Service Award, presented to an advisor who has made an outstanding impact on a community through managerial contributions to a non-profit organization.
†Financial Times, FT 300 Top Registered Investment Advisers, June 2019. The ranking reflects six areas of consideration including the company's years in existence, industry certifications of key employees, AUM, asset growth, SEC compliance record and online accessibility and calculates a numeric score for each company.
Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.