“Portion” – it might just be the most important word when it comes to money matters. Especially to the topic of how couples should organize financial ownership. I’m often asked things like, should all our accounts be joint? The subject of joint accounts is always a hot topic in focus groups and interviews I conduct. Always single, single again, partnered, it doesn’t matter, everyone has an opinion. Some advocate for merging everything, others have strong opinions about keeping everything separate, and then there are those who find that a hybrid of both work for them. Regardless, personal experience and observations of others shape our perspectives and there is no one right answer. Like most things in life there are pros and cons. But while there is no one size fits all answer, typically the best course of action is portions; a combination of yours, mine and ours.
Access to money is fundamental to financial security. When we have our own accounts that is money that only we can access, it’s just our money. Having your own accounts is both independence and protection. Independence in that if you want to spend your own money, it is yours and assuming all is well with the household finances, there is nothing wrong with spending your money the way you see fit. It is protection in the event someone needs to leave an unhealthy relationship. It is protection from someone else (a joint owner) cleaning out a bank or investment account. While no one enters into a relationship expecting bad outcomes, it certainly has happened far too often. It is also protection in the event your spouse dies. If everything is in your spouses’ name, your access can be cut off to those funds for quite some time through the estate process. Having accounts with money just in your name is having access to money and at least some degree of financial security.
If having individual accounts both provides independence and protection, why not just have individual accounts? I was speaking with another professional recently whose work is related to reorganizing debt for those going through separation and divorce. He commented, “wouldn’t it be a whole lot less messy if couples just had their own accounts, they can look identical to one another, but if they split, they already have their own accounts. It’s one less thing to fight about”. And while he and I both know that is an oversimplification of things, he isn’t alone in looking for ways to simplify. The reality is, while on the surface it may seem easiest to just have separate accounts, it rarely is practical. It also rarely makes sense at a holistic level for spouses to simply have their own accounts in the just in case scenario they split down the road. Rather, whether it’s for everyday banking or if it’s for long term investments, every household has to figure out what works for them and their personal circumstances. In fact, joint accounts themselves can bring some degree of simplification to managing day to day household finances. Ease of paying bills, the mortgage, utilities, etc. Two pairs of eyes overseeing the account. When both can see, monitor and access the account, it should mean less chance for financial surprise. In the end, many times the answer is a portion in my name, a portion in your name, and a portion that is joint. What portions those are can depend on several different factors.
Beyond personal preferences and what works for you as a couple in how you manage your finances, there are several factors that influence how much goes into each portion. For day to day banking, these can include:
- Health of your relationship – if the relationship is unhealthy, or not working, protection gets prioritized and it would be wise to ensure you have more money in your own name. (This is for short term access should you need it. Family law, and marriage or cohabitation agreements will ultimately decide splits for all assets). In a healthy collaborative relationship with shared priorities, higher portion in joint ownership can make sense.
- How responsible is each person with money? If one has a lot of personal debt, is an excessive spend thrift, has an addiction, or is a gambler, a higher degree of individual ownership may be necessary.
- Does one person have obligations to a former spouse or to children from a former relationship? Do those payments coming out of a joint account cause resentment? Should those be paid from an individual account? Or do you or your partner accept “it is what it is”?
Once we start looking at longer term investment accounts / asset ownership, bigger picture issues also need to be considered:
- Liability – sometimes one partner is at higher risk from creditors or other liability. For instance, if one person in the relationship is in an occupation with a higher likelihood of being sued, it is a common strategy to have their spouse own most of the family’s assets.
- Tax Efficiency – If one spouse has a high income and the other has a low income, tax experts may recommend implementing specific strategies that involve shifting asset ownership.
- Personal Circumstances – if one spouse has a pension plan at work, the other spouse may have more in investment accounts. One spouse might inherit money and keep those funds separate in their own account.
- Opportunity – sometimes one spouse has the opportunity and the other doesn’t. Perhaps it is a business ownership that creates value in one spouse’s name, or an employer has savings programs just for the employee.
- Blended Families – in the instance of blended families, responsibilities to children from a previous relationship, or even simply once hurt twice shy, separation of assets and individual ownership can make sense.
- Survivorship – Account ownership is an important factor when answering the question “if something happens to me will my spouse be okay”, or “if something happens to my spouse, will I be okay”. Again, will a survivor have access to enough money immediately and through the estate process, as well as for their long-term future.
Decisions about individual ownership and joint ownership can be quite simple, and sometimes they are more involved, whether that is planning wise or differences of opinions between the two parties. Beyond independence and protection, day to day banking ownership of accounts decisions are largely practical in nature. For the ownership of larger assets including long term investment accounts, ownership decisions are more involved. For guidance and insight into these issues for your personal circumstances, speak with a financial advisor. Where situations require, it can also be advisable to speak with an accountant and / or lawyer. While we all love simple answers, in the end, when it comes to financial matters, portions are often the key.