- Put together a list of financial accounts.
- Name your account beneficiaries.
- Plan for the worst-case scenario.
- Make sure you and your partner know where important documents are.
Many married couples suffer from a failure to communicate. A 2018 Fidelity survey found that 1 in 7 couldn't accurately report their spouses' employment status.1 More than 4 in 10 couples disagree on when to retire—and more than half aren't on the same page about how much to save for retirement.
"That may not be surprising, since money can be a tricky topic in families," says Ann Dowd, CFP, a Fidelity vice president. "But not laying the groundwork for open money communications can undermine relationships."
For example, our survey found that among the 36% of couples concerned about debt, nearly half cite money as their biggest relationship challenge. They were also more likely than couples who weren't worried about debt to have difficulty talking about money in general.
Don't let that happen to you. Consider these 4 easy steps to help get your money talks off to a strong start.
1. List all your financial accounts
Chances are each of you has a number of financial accounts—checking, savings, credit card, investment, 401(k), IRA, for example. Consider sharing the accounts you each have and where they are. Creating a spreadsheet with account numbers is a great way to keep track of them. Hopefully you feel comfortable enough with your partner to share any passwords or PINs that could be needed in a pinch. Taking an inventory of your accounts can help you get organized, which is never a bad thing. It can also help lay the foundation for investment decisions—which you may choose to make as a household or as individuals.
Consider using secure virtual safes to store the list.
2. Name account beneficiaries
Having a named beneficiary for retirement and investment accounts and insurance policies is as important as writing a will. Assets in these accounts pass directly to the beneficiaries you've designated with your account custodian, trustee, or plan administrator—and generally supersede any instructions in your will.
It’s not hard to name—or update—beneficiaries on financial accounts. Most financial service providers let you do it online. Naming beneficiaries on all accounts can help avoid legal complications in the event of a death.
Retirement accounts. You can name beneficiaries on your retirement accounts, such as 401(k) accounts and IRAs. If you are married, keep in mind that some employer-sponsored retirement plans automatically designate your spouse as the beneficiary unless you name another beneficiary and your spouse has consented in writing. Check with your company.
Nonretirement accounts. Designating beneficiaries on a nonretirement bank account or brokerage account may establish a "transfer-on-death" (TOD) registration for the account. It allows ownership of the account to be transferred to a designated beneficiary upon your death.
Insurance policies. It's a good idea to check your insurance beneficiary designations. Your life insurance policies may not be something you think about often but it’s important that your beneficiaries reflect your current wishes. For example, if you forget to change the beneficiary after a big life event like a marriage or a divorce, insurance proceeds could go to the wrong person if anything were to happen to you.
3. Prepare for the unexpected
No matter your age, it makes sense to be prepared for the unexpected. Each half of a couple should have these 3 documents and discuss their wishes with the other:
A will or a living trust and "pour-over" will combination. A will is an essential legal document that sets forth your wishes regarding the distribution of your property and the care of any minor children when you die. A pour-over will is established by an individual, often in conjunction with a trust. Upon the death of the individual, all or a portion of their assets can be transferred—or "poured over"—to a trust. By doing so, an individual can ensure that their estate has explicit directions on moving estate assets to a trust. Additionally, a properly structured pour-over may alleviate the burden of requiring the estate to undergo an often costly and lengthy public probate process.
A power of attorney appoints an agent to act on your behalf regarding financial and other matters while you are alive. It can be a durable power of attorney, which takes effect immediately—or a springing power of attorney, which takes effect if you become incapacitated and unable to handle matters on your own.
A health care proxy names a person, or persons, who can make health care decisions for you if you are unable to communicate or don't have the capacity to make decisions.
You may also want to draft an advance medical directive, also known as a "living will." In general, it outlines your wishes regarding life-prolonging medical treatments and may vary depending on your state of residence. It becomes effective only under the circumstances stated in the document.
To find out more, read: Managing estate planning
4. Organize important legal documents
The last 2 years of tax returns, marriage and birth certificates, insurance policies, wills, and health care proxies are a few of the things both partners need to know where to find. Designate a specific place for them. You can either store your estate plan and other important documents in your attorney's office or select a fireproof place—such as a bank safety deposit box—that someone close to you can access in an emergency. Again, consider using secure virtual safes to store copies of important documents and other information, such as passwords, financial statements, and wills.
Talk to your partner about money
Of course, there are many more financial issues for partners to talk about, but these 4 are essential. Once you have the initial talk, revisit money issues regularly—consider reviewing your accounts together at least once a year. A convenient time to touch base may be at the end of the year, at the beginning of the year, or when you are preparing tax returns.