Preparing for Life Events: Marriage, Death, and Divorce

There are specific life events, such as marriage, death and divorce, that are both highly emotional and require some financial preparedness. It is to your benefit to sit down and evaluate how such events would affect your financial life so you can establish guidelines now, rather than having to make crucial financial decisions during such emotional times.

Marriage: Prior to marriage, both parties should disclose all of their finances, including assets, credit issues and debts. This lets you formulate a plan together. Typically, joint bank accounts are set up, but some couples elect to have their own separate accounts and investments. While there is no right or wrong, it is important to establish in advance who has access to each account as well as who will handle financial matters — which could be a dual job.

Marriage often requires beneficiaries to be changed on investments, bank accounts and life insurance policies. Also, if a woman is changing her last name or hyphenating her name with that of her husband, she needs to take the time to change the name on all important documents.

Death: Estate planning is not only for the wealthy. A will should be in place that determines where your assets will go in the event of your death. It should cover all property matters, wrap up your financial concerns and, most significantly, determine who will be the legal guardians of all minor children.

You may determine that you want greater control over your money by setting up a trust. There are a wide range of trusts available, and you should discuss your options with your attorney or accountant. The basic principle, however, is that you can define in the trust specifically where the money will go and when. Trusts also avoid the long probate process.

Beyond wills and trusts, both parties in a marriage need to know where all significant documents and information can be found. Create a list that indicates where items such as safety deposit box keys, financial statements, property deeds and other key documents can be located. If you are single, you also need to entrust someone with such knowledge.

Divorce: Although a divorce indicates the end of the marriage, it does not signal the end of financial responsibilities. You are still responsible for joint accounts, credit card bills, home loans and anything else that has both of your names listed. Therefore, you need to close joint accounts, open your own individual accounts and establish your own credit rating. Until you know for sure who of you is paying specific bills, make sure to cover the bill payments. Otherwise your credit rating can suffer. For women, re-establishing credit under your own name may also be important.

A divorce settlement may include payments to your ex-spouse. If you keep good financial records during your marriage, the courts will have numbers to verify that such expenses are valid.

Preparation for all major life events means, more than anything, keeping good records, knowing where finances and documents are and having good communication so that all parties know where they stand financially at any given time.