The happy couple is about to be joined in holy matrimony. In other words, their lives will merge. But that may not mean they should also merge all their money and assets.

According to a new study from Kansas State University, data from 4500 divorced couples revealed that both men and women identified money as the biggest cause of marital strife. And this was true for all income levels.

It was all hearts and flowers in the beginning, so neither spouse wanted to spoil it all by talking about money. But money can be a major issue in marriages with a hotbed of issues: who controls what, who earns the most in a two-income household, how does each partner view money, and so on. It calls for some practical sense and serious conversations early on in order to avoid the pitfalls later.

Spender or saver: Understanding your spouse’s concept of money

Money is not a fun topic of conversation, but its important to understand where each is coming from. If they decide to merge finances, ground rules need to be set and compromises made that can still be in line with their individual values.

For instance, the spender who marries a saver will need to create and stick to a monthly budget and set goals for saving. The saver might be able to relax a bit and occasionally indulge the spouse, like for a special getaway weekend. But this does not mean getting into full-on “Keeping up with the Joneses” mode.

Inheritances

If one spouse receives an inheritance, they may have full control over how that money will be handled, whether sharing it with the partner, or keeping it in a separate account. If the money is kept separate, its typically not subject to division. The only exception could be when a couple divorces or if the inheritance funds were shared or used to jointly purchase property or other assets during the marriage.

If the recipient does not want to divide the inheritance upon divorce, the money should be kept entirely separate from marital property. However, if a married person shares even a portion of the inheritance, it is generally presumed that the intention was to share all of it. It may require legal action to prove actual intent, and the burden of proof is on the spouse who initially received it.

When Women Are the Breadwinners

In almost a third of two income households, the women are the breadwinners. This can be a heavy load for her, plus the man of the house can sometimes feel the cultural pressure to be head of household and support his wife and family. It can create an uneasy dynamic for both spouses that can lead to stress and marital discontent.

Blended families and step children

According to the Pew Research Center, more than 4 in 10 American adults have a stepparent, a step or half sibling, or a stepchild. If you marry someone with minor children, you are definitely taking on a financial responsibility. Both parties need to be open and honest about their own financial situations, credit history, assets, and retirement funds. This is especially true if there are any financial obligations from the previous marriage that could include alimony or child support.

Put and Take

Legally, marriage is a financial partnership. Discussions around money management are part of what makes the partnership work. All money doesn’t have to be shared. Many couples set up accounts that are joint and some separate. I’ve always like the “Put and Take” account concept where the couple takes a portion of the money set aside for discretionary spending and divides it; let’s say 10%, for each spouse. Each manages their own discretionary spending with no questions asked by the other.

In all of these situations, communication is key, as are regularly scheduled conversations around financial planning.

Judith A. McGee is the chair and chief executive officer of McGee Wealth Management, Inc., an independent registered investment advisor. She is a co-branch manager of, and offers securities through, Raymond James Financial Services, Inc. (Member FINRA/SIPC) in Portland. Contact her at 503.597.2222 or Judith@mcgeewm.com.

The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision. Any opinions are those of Judith A. McGee and not necessarily those of RJFS or Raymond James.

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