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Protecting yourself from financial infidelity

Key takeaways

  • Spouses should be sitting down annually and having a "financial summit" to ensure they're on the same page.
  • It's important for both spouses to be involved in managing finances, meeting with advisors, and more.
  • Clarity around how assets may be transferred via beneficiary designations and estate plans can help avoid unwelcome surprises.

In her years working for Fidelity as an advanced planner, Kelly Quinlan has heard some hair-raising things from couples who don't plan together. "Every relationship is different," says Quinlan. "But sometimes I'll hear someone say, 'My wife doesn't know that I have this account,' or 'My husband doesn't know about this,' or 'We manage our finances separately, so I do not really know what my spouse has for assets.'"

Withholding information and hiding accounts or expenses are obvious red flags, but financial infidelity isn't always necessarily intentional. It could also be a case of one spouse simply failing to consider the current or future financial needs of the other or feeling the need to control the family finances to such an extent that the other spouse is denied the appropriate knowledge and access that they would need to take care of things in the event their partner becomes incapacitated or passes away. While these oversights may not be malicious, they can be just as damaging.

Ultimately, a good financial relationship between spouses is one in which they are both fully informed, make decisions together, and have developed a mutually beneficial long-term plan for their finances. Each partner should be confident that, should they need to, they would be able to cover their present expenses, sustain their lifestyle in the future, and feel certain that they will have a place to call home.

"Transparency is key," says Quinlan. But to achieve that transparency and make sure your partner isn't keeping you out of the loop, you may need to take the initiative. Here are 6 things you can do to help protect yourself from financial infidelity—intentional or otherwise.

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1. Know where the money comes from—and where it's going

"Spouses should be sitting down together and having an annual 'financial summit,'" says Quinlan. "They should be going over their budget, the types of accounts they have, account beneficiary designations, and contact information for advisors, accountants, or anyone else who might play a role in managing the family finances."

The goal of this financial summit should be to get a picture of the full scope of your finances and get a sense of your family's cash flow. What assets are there, and how are they invested? What liabilities, such as mortgages, loans, or other forms of debt, are there? If you aren't working or are not the primary breadwinner, what sources of income are there and how stable are they? Are you sufficiently prepared for emergencies?

It's also a good idea to work out a budget and get a sense of what your family's biggest expenses are. "So many people I meet with don't have a good sense of how much they're spending each year," says Quinlan. This lack of understanding can lead to problems down the road.

As part of the planning process, couples should also consider meeting with an estate planning attorney to review the couple's estate plan to understand how those assets would pass to each other or to heirs should one or both partners pass away or become incapacitated.

2. Get authorized to access financial information

Once you have a full understanding of what accounts there are, how they are titled, and any ongoing or future liabilities related to them, make sure you have the ability to access them and the right to manage them. If your name isn't on the utility bills, the mortgage, or other important financial accounts, make sure you're added to the account as an authorized user or that you have what is called a durable power of attorney for financial affairs; that way, representatives will be allowed to discuss the details of the accounts with you.

You should also determine whether your assets are held in joint accounts, which would give you control over the assets and depending on the type of account and may allow you to automatically assume ownership in the event of your partner's passing, or whether they are held in accounts that are solely in your partner's name. In the latter case, the accounts would pass according to their beneficiary designations or potentially through probate upon the death of the account owner.

3. Take on some of the financial responsibilities yourself

In her role at Fidelity, Quinlan often works with clients and their Fidelity advisors to help provide insight and education regarding their estate plan. During these conversations, Quinlan has frequently heard one partner state something like "I was so focused on raising my children or advancing in my career that I didn't really pay attention to the bills we had and how they were being paid, or what accounts or investments we had."

"When they end up in charge of the finances," says Quinlan, "it can be a real eye opener. They're often surprised by how little they knew."

If you are not currently involved in your family finances, she suggests assuming responsibility for managing some of the family finances, perhaps paying certain bills or acting as the point person for certain relationships, such as with an insurance agent or accountant, to ensure you stay up to speed with what's going on. It also provides an opportunity to strike up a regular dialogue with your partner where you can each share updates on the financial responsibilities you manage.

4. Be present for discussions with financial advisors

"It's important that both partners try to attend meetings with financial advisors to ensure they both understand what's going on," says Quinlan. Being in the room allows you to make your voice heard and to ensure that what's being discussed factors in your thoughts, feelings, and desires. It's also a good opportunity to develop your own relationship with the advisor, which can make the transition easier should you have to take primary responsibility for your family finances in the event of a partner's death or incapacitation.

5. Understand how assets might be transferred

For each of your family's accounts, it's important to clearly identify who the beneficiaries are or how they are handled in your family's estate plan, as these will determine who ultimately ends up with the assets. With real estate in particular, it is important to specifically state your intentions in an estate plan in the event of the death of the primary owner. This is particularly important for blended families. "Kids can often get written out of an estate plan unintentionally," says Quinlan.

"When I meet with a couple and their Fidelity advisor, I stress the importance of not relying on your family or friends knowing your intentions and carrying them out the way you would hope," says Quinlan. "From an estate planning point of view, when someone passes away, the only thing the family has to go by are the words written between 4 corners of each of your estate planning documents. Failure to spell out and properly document your estate planning intentions can sometimes lead to family fracture, costly litigation, loss of tax savings and sometimes unintentional disinheritances."

6. Find out how you fit into the bigger picture, and who else might be involved

If your partner was previously married or has children from a previous relationship, it's important to understand whether your partner has any legal obligations that could affect their estate. "It is important to note that there may be ongoing financial obligations spelled out in a divorce decree that should be factored into a client's financial or estate plan," says Quinlan. "There may be aspects of the divorce settlement that only come to bear at death regarding life insurance policies or the allocation of certain retirement account assets that would benefit the ex-spouse rather than you, the present spouse."

Quinlan has also seen situations where a deceased spouse expressed a wish to their adult children that their new spouse, the children's stepparent, be afforded the right to remain in their shared home as long as they wish but passed ownership of the home directly to the children. "If that wish isn't reflected in an estate plan," says Quinlan, "there's no obligation for the children to respect it, and if they suddenly decide they want to sell the house, there's not much the surviving spouse can do."

Don't take a back seat

Financial infidelity can damage trust and undermine the financial stability of a relationship. It is important for couples to be open and transparent about their financial affairs and to work together to make financial decisions that are in the best interests of both partners. "Delegating tasks is part of every marriage or partnership," says Quinlan, "but don't be complacent or take a back seat when it comes to your finances." If your partner is resistant to engaging in open communication, you may want to consider seeking the help of your own financial professional or attorney. They may be able to help you to understand your rights and options and can provide guidance on how to protect your financial interests should the need arise.

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