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Four things to talk with your partner about now

Discuss beneficiaries, accounts, location of important documents, and an emergency plan.

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Pop quiz. Do you know how much your significant other makes a year? Many don't. In a recent survey of couples, 43% couldn’t correctly identify how much their spouse makes.1 And that’s even though most couples (72%) say they communicate exceptionally or very well about financial matters.

While not knowing your partner’s salary may seem like a small detail, it’s important for each half of a couple to have a clear picture of the household’s finances. What if something happens? When it comes to money and marriage, ignorance is not bliss.

“We know couples don’t always agree when it comes to money, but we were surprised how many missed the mark on the question of their spouse’s salary,” says John Sweeney, executive vice president of retirement and investing strategies at Fidelity. “If gaps exist around basic questions regarding finances, it may be an indication there are other financial matters couples need to talk about.”

Indeed, our survey revealed that many couples had a knowledge gap on managing finances, saving for retirement, and retirement income, as well.

What to do

First, ask your partner what he or she makes… and then talk about these four things, as a way to get started.

1. The basics: a list of financial accounts

Chances are each of you has a number of financial accounts—checking, savings, mortgage, credit card, investment, 401(k), IRA, etc. Make sure you at least know which accounts you each have and where they are. Creating a spreadsheet with account numbers is a great way to keep track of them. It can help lay the foundation for the investment decisions that you might have to make later. It can also help you get organized by taking an inventory of all your accounts. Consider using secure virtual safes, such as Fidelity’s2 FidSafe® to store the list.

2. Account beneficiaries: no matter what age you are

Having a 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.

3. Be ready: What to do if your other half dies or becomes disabled

Again, no matter your age, it makes sense to be prepared for the unexpected. Each half of a couple should have these three documents and discuss their wishes with each 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 his or her assets can be transferred—or “poured over”—to a trust. By doing so, an individual can ensure that his or her estate has explicit directions on moving estate assets to a trust. Additionally, a properly structured pour-over will 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 is in 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. 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.

4. Emergency planning: Know where important legal documents are

It’s not uncommon for couples to keep important documents in different places, or in a fireproof safety deposit box. The last two 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, such as FidSafe®, to store copies of important documents and other information, such as passwords, financial statements, and wills.

In conclusion

Of course, there are many more financial issues for partners to talk about, but these four are essential. Once you have the initial talk, remember to check things at least once a year too. 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.

Learn more

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1. The 2015 Fidelity Investments “Couples Retirement Study” analyzed retirement and financial expectations and preparedness among 1,051 couples (2,102 individuals). Respondents were required to be at least 25 years old, be married or in a long-term committed relationship and living with their respective partner, and have a minimum household income of $75,000 or at least $100,000 in investable assets. This online, biannual study was launched in 2007 and is unique in that it tests agreement of both partners in a committed relationship on communication, as well as their knowledge of finances and retirement planning issues. Fidelity Investments was not identified as the sponsor. GfK’s Public Affairs & Corporate Communications division executed the study, which was fielded in April 2015. For more information, a fact sheet and infographic can be found on Fidelity.com.
2. FidSafe is a service of Fidelity Labs, a Fidelity Investments company.

The tax information and estate planning information contained herein is general in nature, is provided for informational purposes only, and should not be construed as legal or tax advice. Fidelity does not provide legal or tax advice. Fidelity cannot guarantee that such information is accurate, complete, or timely. Laws of a particular state or laws which may be applicable to a particular situation may have an impact on the applicability, accuracy, or completeness of such information. Federal and state laws and regulations are complex and are subject to change. Changes in such laws and regulations may have a material impact on pre- and/or after-tax investment results. Fidelity makes no warranties with regard to such information or results obtained by its use. Fidelity disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information. Always consult an attorney or tax professional regarding your specific legal or tax situation.

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Fidelity Brokerage Services LLC, Member NYSE, SIPC, 900 Salem Street, Smithfield, RI 02917

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