Guest Author - Reshma Vyas
One of the most difficult, persistent ongoing challenges for many married couples is how to approach shared financial goals and responsibilities. While, it is clearly healthy and distinctly advantageous for many couples to continue to hold their respective financial assets separately, there are specific situations that may arise in which some commingling of monetary funds are convenient and practical measures.
Budgeting And Household Expenses: Management of shared household expenditures and responsibilities can be greatly streamlined through the use of a joint savings or checking account. A joint checking or savings account which draws on an equal and preset contribution by both parties can be extremely useful to cover fixed and variable expenses for:
• Utilities, rent or mortgage.
• Home repair, maintenance and remodeling projects.
• Home furnishings, appliances, accessories and decorative items.
• Jointly owned vehicles and property.
• Repayment for shared loan obligations.
• Care of pets or other joint personal responsibilities.
Know The Pitfalls Of Joint Bank Accounts!
Having a “small” joint bank account, even for the purpose of paying household bills is a tremendous responsibility. Needless to say, meticulous recordkeeping and monitoring of all joint accounts is an absolute necessity. Individuals who doubt the sincerity and commitment of their partner should refrain from opening any kind of joint financial account.
Before even pondering a joint bank account, both partners need to honestly assess their financial behaviors, level of commitment, spending and savings habits and personal attitudes regarding money. Each partner should be aware of the various types of joint ownership (e.g., joint tenants with rights of survivorship or tenancy in common), the potential benefits and consequences, tax and legal implications. One obvious benefit of a joint checking or savings account with rights of survivorship is that the assets pass on to the surviving spouse, thereby avoiding probate.
Generally, joint bank accounts are susceptible to several risks including but not limited to:
• The very real possibility that if the relationship breaks up, one partner could withdraw all the funds from the jointly held bank account.
• Liens, judgments or garnishments.
• Excessive withdrawals from the account by one of the parties for personal purchases.
• One partner could use the funds in the account as collateral for a loan and not repay the loan.
• If one partner has a habit of bouncing checks, their negative behavior could damage the other partner’s ability to apply for credit or open other separate bank accounts.
Hobbies And Vacation: It is not unusual for many couples to pursue the same hobbies and recreational sports. Depending on each partner’s income level, sharing the costs of vacations and recreational activities can yield tangible savings. Some hobbies are extremely expensive when pursued singly.
Insurance: Couples, particularly those recently married, will need to give careful thought to their specific insurance requirements with regard to present and future needs. They should evaluate their present allocation and ownership of all separate and joint financial assets and their estate plan. Life insurance can play a crucial role in estate planning. Newly married couples may be eligible for auto insurance discounts as they may prefer to merge their single policies into a joint policy. Insurance for life, health and even long-term care may be more affordable when bought jointly.
Investments: As a relationship grows and evolves, some couples who are confident about their mutual goals and interests may wish to pursue joint investments. Each partner may want to allocate a fixed amount of money in a jointly held investment (e.g., a mutual fund). An underlying practicality may also be present as some investments require higher initial outlays of capital which necessitate a joint effort.
Real Estate Purchases: Many couples, at some stage, may decide to pursue joint ownership of real estate. The real estate purchase may be intended for use as their primary residence, vacation or rental property. Considering the relatively high cost of housing today, pooling equal amounts of money to share the burden of a down payment, closing costs, insurance, maintenance and property taxes can be a viable cost-effective option for many couples. In some instances, the pooling of funds can be a marked advantage in obtaining greater leverage.
The commingling of monetary funds and joint ownership of tangible financial assets adds to the complexity and weight of a relationship. Issues of trust, transparency, mutual compatibility and commitment are inherently tied to the success or failure of any joint financial venture. Every couple has its own dynamic in terms of their interpersonal relationship which calls for a unique arrangement that is specific for each case.
For informational purposes and not intended as advice and/or recommendation.