As younger generations of Americans marry later in life, they are more likely than their parents to keep their spousal finances separate. That's not necessarily a bad thing. Finances are a huge discussion for any couple, particularly newlyweds, and there is no single right answer as to when—or if—to combine them since every couple's situation is different, says Jesica Ray, a certified divorce financial analyst at Brighton Jones.
While many advisors say combining assets builds trust and makes it easier for each spouse to be part of paying bills and establishing a family budget, Ray takes a different tack. She says couples should take a closer look at how they structure their finances and decide if the arrangement is—as is often the case— based on cultural or societal assumptions that don't reflect one or both people's values.
"If you value ease, then joint finances might be the right path for you. If you’re okay with a little complexity, the advantages of keeping assets in your own name helps in the case of protection," says Ray. "Start out separate. Have a joint account for joint expenses, and then have your own. Drive some money into the joint account, and then the rest into personal."
By protection, Ray means in the case of divorce, but also in instances of creditors coming after assets, or to be able to qualify for governmental programs later in life.
She also finds that keeping finances separate can help each spouse feel more independent, particularly women. For people who get married later in life, when they've had time to build up their careers and savings on their own, keeping separate finances can be an important part of their identity.
"We’re shifting toward a world where it’s more common and comfortable to not join finances, and that’s okay," she says. "Divorce is one of those reasons, but self-empowerment is another as women create their own wealth."
Jody D'Agostini, a certified financial planner at Equitable Advisors, generally advises clients to have mostly joint finances—at least to the degree described by Ray above, where there is a joint account but each partner also has their own, a strategy called "yours, mine, and ours" in the financial community. But there are cases when the equation changes.
She tells her clients not to commingle inheritances or financial gifts from family with marital assets. That means not depositing the inheritance in a joint account and not using the money to pay joint bills or a joint debt. Instead, deposit it in an account with your name on it only.
"The intent from the person granting it to you is to pass it to you for your benefit, not for your spouse," says D'Agostini. Again, this is for protection in case of divorce, or even escaping financial abuse. "Inheritance is never considered to be marital unless you start to commingle it or derive income from it."
To that point, in most states, an inheritance is not considered part of the marital property, but rather separate property (that's different from money earned or other property acquired during a marriage). But if you start commingling it with your marital assets and divorce later, problems can arise.
D'Agostini also says each partner should keep their premarital assets separate, if only to simplify things in case of a divorce. This can be done through a prenuptial agreement.
"A prenup can help professional couples with a certain amount of assets under their belts," says D'Agostini, noting there's no specific asset threshold level where it makes sense to get one: "It’s where your comfort level is."
Another instance it makes sense to keep finances separate: a second marriage when one or both spouses has children already. Keeping money separate in this case can help ensure that the assets each spouse acquired before the marriage go to his or her children (if that is her wish) after death.
"You don't want to make mistakes where your estate could go to your spouse and then their children," she says. "Get your estate plan in place before you get married."
