How to make tough conversations about money more productive
Making decisions with your spouse or partner can be tough sometimes, but even more so when it involves money and your relationship is undergoing change.
Studies show that money is the #1 source of stress for U.S. adults (higher than work or family responsibilities) and the top source of stress for couples. And even for couples who don’t squabble, it can be a difficult conversation because each person comes to the discussion with a unique viewpoint based on his or her own experiences and emotional needs.
That means it may take a little work (and sometimes the help of a dispassionate third party) to make your conversations about money candid and productive. In fact, a recent Fidelity study found that while most couples (70%) say they talk about money frequently and 64% put all of their money into joint accounts, those shared activities still didn’t assure open conversations. Even those who said they communicated well didn’t know how much their partners earned!
Put your emotions aside to focus on common goals
So how do couples make their conversations about money more productive and mutually satisfying? Some tips gleaned from a review of “couples and money” research:
- Try to leave your emotional baggage behind by concentrating on the financial activities you must tackle together
- Find points of agreement about common aspirations, goals, and priorities
- Involve an objective third party to make sure you both have a say in how your financial and estate plans take shape
Meeting together with your Boston Private advisor is a good place to start. He or she can help you:
- Review your investment accounts and make sure they still address your needs and reflect any changes. If your views on investment risk aren’t in sync, your advisor can help you work on a diversified portfolio that seeks maximum returns for the level of risk that you are both comfortable with.
- Check the primary and contingent beneficiaries for your retirement accounts to see that they are up-to-date as well. By law, the primary beneficiary for workplace (or “qualified”) retirement accounts is your spouse, unless you have signed and filed a waiver.
But you have more flexibility in naming contingent beneficiaries. “They can be children, grandchildren, nieces and nephews, your trust, or a favorite charity, depending on your goals for that money,” says Jeanne Barrett, Senior Vice President at Boston Private. For IRAs, SEP IRAs, and annuities you can name non-spousal beneficiaries as well. Just make sure you update them together as your life changes.
- Go through your estate plan and related documents to make sure they align with what you both want for your family and your own care in the future.
If you already have an estate plan, wills and health care directives in place, Barrett recommends reviewing those documents at least every three years – or more often if your circumstances change. The birth of a new child or grandchild, a death in the family, the purchase or sale of a home or other assets, changes in your income, or an inheritance are all reasons to re-examine your estate planning strategies she says.
Consider the need for trusts to meet your unique needs
It can be sobering to think about who will take care of things if one spouse becomes ill or incapacitated, but it’s a critical planning element to agree on, says Barrett. If there are substantial assets at stake, you may want to consider establishing trusts to make sure those assets are handled by your spouse according to your wishes. “This can alleviate a key area that people worry about, but don’t take time to address,” she says.
With a trust, you can specify what happens to the assets under a variety of circumstances and for multiple generations, Barrett says. “A trust can address the particular concerns that you may have as a couple.”
As an example, she offers the case of a woman who worried about her husband’s ability to manage the assets designated for their daughter if she predeceased him, because his family had a history of dementia. Their solution was to put their assets into a trust that specified that a new trust would be created if the wife died first. That new trust named a co-trustee who had to agree with any decisions that the husband made about the assets before he could implement them, to make sure his decisions were sound.
There are many ways trusts can be structured to make sure your wishes as a couple – and as individuals -- are honored. A trust advisor can help you examine all of the options available to you.
When you can’t reconcile your differences
Making decisions with your spouse or partner about money and finances will always involve some give and take and compromises. But it gets even tougher when your relationship is under the stress of a separation or an impending divorce.
And even though the U.S. divorce rate has fallen in recent years, divorce is not an unlikely occurrence. Nearly 40% of first marriages end in divorce every year. That’s about one divorce every 40 seconds.
“In this case you need your own advisors” says Barrett, “and you’ll need to start looking differently at the documents related to your personal care.” While the disposition of assets and property can’t be changed until a divorce is final, there are some areas where you can make changes, particularly when it comes to decisions about your care in an emergency. If you are in the process of getting a divorce, she recommends that you:
- Make sure you understand your rights under state law concerning community or “elective share” property, what’s in your will, trusts in your name, and how assets will transfer after your death.
- Get counsel from your own estate planning attorney regarding your choices. “You definitely should look at your will and health care directives to see what things you can change,” Barrett says.
While you can’t change who is getting what in your will during the divorce process, you can change who is going to execute it. And you can change the person who will make health decisions on your behalf if you become incapacitated due to surgery, illness, or an accident. This should be a person you can trust -- a family member or a close friend. If you have your spouse named as a successor trustee for a trust you own, you’ll want to change that too and put someone else in charge of your money.
Guidance through rough spots in solid marriages too
For those whose marriages are strong, opening up the lines of communication and beginning to reconcile your money differences should make it easier to tackle other tough money situations as they arise.
And if you should hit a rough spot in the future, remember to turn to your Boston Private advisor for a knowledgeable resource and sounding board who can help connect you to trust and estate planning resources.
At Boston Private, we take a holistic approach to managing your wealth today and for future generations, not just stepping in for one aspect of your financial life, but guiding you and your spouse toward long-term success.
 Footnote Stress in America study by APA
 Fidelity Investments “Couples Retirement Study” 2015 https://www.fidelity.com/viewpoints/personal-finance/couples-and-finances
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