He loves me, I love him. I trust her, she trusts me. She can have her stuff, I will have mine. He doesn’t have much money, I don’t either.
Why would we ever need a pre-nup?
The answer to this could be…you don’t. But then again, maybe you do? And even if you don’t need an actual pre-nuptial agreement, you should still have the “pre-nuptial talk.”
Two major causes of divorce are money issues and lack of communication. If you and your spouse can’t talk about money, what else will there be that you can’t talk about? Some professionals believe the way people handle money may be indicative of how they will handle other things in life like relationships, business decisions, and parenting. So even if a formal pre-nuptial agreement seems out of the question, you still need to have the “pre-nup talk.” After all, as the saying goes, “Money makes people funny.”
Wondering what you should talk about? Here are a few ideas to get you started:
Review Your Credit Scores
You each should set up a Credit Karma account to check your scores. If your future spouse has a score of less than 700, you need to know what caused it—late payments? too much debt?—and you need to devise a plan to fix it.
Low credit scores can impact a lot of the things you do in the future. If you decide to buy a house, a low credit score can impact your ability to get a loan. If you are looking to buy a car, your interest rate could be higher than someone with a better score. And even employers may ask to see your credit history before they consider hiring or promoting you; many businesses don’t want employees they feel are irresponsible with money.
Discuss Your Health Insurance Plans/Other Employee Benefits
Even if you have your own plans, you need to know what your partner’s plan covers. What are the fees/deductibles? If you are planning on taking a leave from work to raise a family, what kind of maternity/paternity benefits will you have? What kind of insurance is available for a family? What if you choose to adopt—are there benefits or family leave time?
You also need to consider what will happen if one of you loses a job or gets disabled. Where will your income come from in that scenario? Can one of you be completely responsible for all of the bills and debt?
Share Your Last Two Years of Tax Returns
It is important to see if there are any significant losses. If so, what were they and why did they happen? Is there any chance of an IRS lien? Do you think too much money was withheld…or not enough? (And are you happy with either arrangement?)
Remember, once you file a joint return you are seen as one entity in the eyes of the IRS. If issues arise in the future, what is your plan for approaching and fixing them?
Previously Divorced? Share a Copy of Your Divorce Decree
If either partner has been divorced, the spouse-to-be needs to know the financial arrangements of that divorce. Is there alimony, child support, or other future financial obligations? If children are involved, is there life insurance for their care? Does the ex-spouse have any rights to pension benefits? Who is the beneficiary of benefits or investments? How should your own assets be designated? What kind of planning do you need to do for a blended family?
Arrange Your Bank Accounts
It’s important to decide if you will keep separate or joint bank accounts…or have both. If you have an inheritance, be careful about moving it into a joint account. It’s important to know how and when to keep pre-marriage assets in your own name.
These questions are a good start to your “pre-nup talk,” but don’t stop the conversation there. Keep talking about finances. There are very few things in your marital life that will not be affected by money. Your financial situation relates to where you live, how you vacation, where the kids go to school, when you retire, how you help your community or favorite charities, and so much more.
Having the “pre-nup talk” is essential. And even if you decide to live together instead of marry, are already living together, or were married without ever having the talk—the “pre-nup” discussion is important for you, too. It’s never too soon to get comfortable talking about finances with your partner.
He loves me, I love him. She trusts me, I trust her. These are the very reasons you need to have the “pre-nup talk.”