Until debt do us part – the financial implications of marriage

 September is around the corner and so is spring, one of the most popular seasons for couples to tie the knot. Fiona Teeling Regional General Manager at Momentum says that love is often blind when it comes to money, and this can lead to couples making poor financial decisions when entering into a marriage.

“While it is not a romantic conversation to have, marriage is a financial transaction as much as it is a transaction of the heart. The conversations you have and the contracts you sign will all have a fundamental impact on your financial future, as a couple and as an individual – as with any happy story, this union will have an ending, whether due to divorce or death” says Fiona Teeling.

She provides some insights on key financial discussions to have and decisions to make about the financial realities of marriage, well before the wedding day.

Debt and contracts

Marrying someone could result in you also marrying their financial baggage. Leanda says this is where the marriage contract comes in. “Although both of you will be impacted by monthly debt repayments, the ownership of debt is largely influenced by your marriage regime: in community of property or out of community of property by way of an antenuptial contract with or without accrual.”

Fiona explains that marrying in community of property means you are jointly responsible for your spouse’s debt, including debt they racked up before the marriage. If you get married without entering into a contract, you will be married in community of property.  It is our automatic marriage regime.  “Even though a marriage in community of property was the flavour of the day when our parents got married, many couples today enter into an ‘antenuptial contract with accrual’ marriage regime, which means that both have their own assets and liabilities during the marriage, but when the marriage ends, they will share in whatever was accrued during the marriage.”

Couples who are married in community of property will ultimately share a credit record, meaning that your spouse’s bad spending habits can also negatively impact your credit score.

This is why Fiona says it is a good idea to have an open and honest discussion about financial matters well before getting married so that you and your future spouse know what they are letting themselves in for. “Every marriage should start with honesty and transparency, including about financial affairs and how you both feel and think about it.  It is the perfect time for a couple to appoint a financial adviser to assist them to make the best financial decisions from the start

Update the paperwork

You may not want to think about the passing of your spouse, but it may happen and needs to be properly planned and provided for. When entering into a marriage, Fiona advises to review all insurance policies, reconsider employer provided benefits and update the beneficiaries as needed and draw up a will – the marriage regime will impact how assets can be dealt with in the will – another reason to choose wisely.”

Align your goals

If you are going to spend your lives together, Fiona says the best financial decision is to align your goals. “Who will pay what?  What does the household budget look like?  What are you saving for? What are your retirement plans? Where do you want to live and how many children do you want to have? These goals require a shared financial vision and plan.”

“Investments and insurance form part of long-term financial goals that both parties should fully agree on. Both of you should also always know where your money is going and what the expected return is down the line, it is important to have a plan and to revisit that plan to make sure that you remain on track.” says Leanda.  Like a marriage, financial matters require regular reviews to make sure that plans are fulfilled.

So, whether you are enjoying the honeymoon phase of a new relationship or are deep in a decade-long marriage, Fiona says it is never too late to open up and be honest with one other about money. “If you don’t have the knowledge, it could be difficult to have that all-important money conversation. I would suggest that you both consult with your respective financial advisers to help you navigate your finances within your relationship on your journey to marital bliss.

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