Happily Ever After: Protect Yourself Financially

In a perfect world, you’d receive an irrevocable guarantee that you and your spouse will grow old and financially secure together. And of course that’s your intention when you say “I do.” But in the real world, bad things can and do happen–like divorce, disability and death.

Being cautiously optimistic by acknowledging that your married life may not go as planned is financially prudent. It may not be romantic to anticipate the unexpected, but having your financial house in order in case of trouble goes a long way toward helping you deal with whatever life throws your way.

Consider the following tips to protect yourself financially.

Allocate assets

If you don’t have a prenuptial agreement to protect your financial interests, consider a post-nuptial one. Such an agreement can indicate who gets what assets in the case of divorce, death or long-term disability. An agreement can also protect assets gained after marriage, like an inheritance or earnings such as royalties.

Allocating assets is especially important if you live in a common law property state, which constitutes most of the U.S. In such states, assets belong to whoever is named as owner, no matter when those assets were acquired. When property is divided during divorce in such states, the court decides what is equitable and fair.

For those living in community property states where the property becomes jointly owned after marriage–California, Texas, Nevada, Idaho, Washington state, Arizona, Louisiana, New Mexico and Wisconsin—it’s still important to make sure that you are listed jointly on all property, such as the deed to your home.

Decide who gets the debt

Determining who will be responsible for your various debts while everything is fine in your marriage helps greatly if trouble brews. If you’ve already discussed who will be taking on lingering credit card balances or a home equity line, it makes it easier to allocate expenses in the event of a break-up. Whether you live in a common law property or community property state will also affect this outcome.

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Consider insurance

Hope for the best, yet plan for potential trouble and breathe easier by obtaining adequate insurance to safeguard your money and lifestyle. Get life insurance for both of you and carefully choose your beneficiary. Also seriously consider short and long-term disability insurance to cover your living expenses in case of an injury.

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Stay updated on your finances

All too often, one spouse gravitates towards dealing with the finances. While this division of labor may work well in the marriage, it puts the uninformed spouse at a definite disadvantage. Stay up-to-date on your finances by scheduling a financial date night with your spouse. Regularly review all of your debts and assets, as well as your budget, and discuss financial goals.

Build a separate credit history

Failing to differentiate yourself as an individual entity when it comes to credit can have disastrous consequences if you get divorced. When all accounts and credit cards are in the name of one spouse, the other person becomes financially invisible after a breakup. Having credit cards and bank accounts in your name helps you build your own financial history. Also check your credit report on a quarterly basis.

Accumulate savings

Divorce, death and disability are all expensive occurrences. And even if things go well with your marriage, you still need a rainy day fund. Build up an emergency fund that will protect you if trouble hits, and make sure to contribute annually to a retirement fund, such as an IRA.

While protecting your pocketbook in case of marriage trouble isn’t a pleasant task, you’ll sleep easier knowing that you’re financially covered no matter what happens.

Julie Bawden-Davis is a staff writer for SuperMoney. Her mission is to help fight your evil debt blob and get your personal finances in tip top shape.
Photo: Marcus Hansson