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.
If you don’t have a prenuptial agreement to protect your financial interests, consider a post-nuptial one. Such an arrangement 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 countries, 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 excellent in your marriage helps much 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.
If you and your spouse are facing an overwhelming amount of debt, a debt relief firm may be able to help you settle it for less than you or your spouse owes. If it’s a manageable amount of debt, consider reading our guide on getting out of debt to do it yourself.
Hope for the best, yet plan for potential trouble and breathe easier by obtaining adequate protection 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.
Stay updated on your finances
All too often, one spouse gravitates towards dealing with the funds. 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 break-up. Having credit cards and bank accounts in your name helps you build your own financial history. Also, check your credit report every quarter.
Divorce, death and disability are all high 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. Consider opening a joint account for savings.
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 widely published journalist specializing in personal finance and small business. She has written 10 books and more than 2,500 articles for a wide variety of national and international publications, including Parade.com, where she has a weekly column. In addition to contributing to SuperMoney, her work has appeared in publications such as American Express OPEN Forum, The Hartford and Forbes.