Love, Marriage And Prenups (Podcast)

David Walters
Hi, Amy. Thanks for having me. I like that you said the word expert. I told my wife I'm

00:33
doing a podcast and she said, you know, what's the topic? I said, “Well, it's marriage, you know, something I'm an expert in: all things marriage.” To which she laughed. I said, “Well, no, the financial stuff.” And she said, “Oh, OK.”

Amy Laburda
Yeah, I do think you certainly qualify on the financial front. I will leave it to your wife on [the] other ways. So in our book, The High Achiever’s Guide To Wealth, you contributed our chapter on marriage — Chapter 11, which is about both marriage and prenups, in fact. So let's start with sort of the sticky end. I think prenups,

01:02
or sometimes premarital agreements, depending on where in the country —

David Walters
The fun part of marriage, prenups.

Amy Laburda
The fun part. [laughter] So I think prenups, or sometimes premarital agreements depending on where you are, whether or not you think they're fun, some people may find them a little less fun, or at least sort of emotionally loaded. Do most couples really need to consider prenups, do you think?

David Walters
So most couples, probably not. There's certainly no harm in having one. But if there isn't significant family wealth,

01:31
or preexisting children, or some major financial disparity, maybe in earnings between the two people: That's the case for a lot of us. You might not need one. But if any of those issues do exist, you definitely should be considering one. In either case, I would say it's important to remember that prenups don't have to be confrontational. They certainly shouldn't be. They often are. They can be. But they don't need to be. It's just another aspect of good financial planning, in my view.

02:01
They don't demonstrate a lack of faith in the marriage, anymore than insurance means that you, you know, homeowners insurance means you have a shoddily built home.

Amy Laburda
Sure.

David Walters
What's the expression? It's better to have it and not need it than need it and not have it. So that's kind of my view on prenups.

Amy Laburda
Makes sense. And I'm sure, in a lot of cases, people are on the same page. It's not a big deal. But I imagine that, sometimes at least, people aren't on the same page.

02:28
As a financial planner, have you run into tricky spots where either the partners aren't aligned or there's pressure from parents or grandparents that's being resisted by the younger generation?

David Walters
Yeah. I mean, those situations certainly do come up. And the idea of a prenup just comes with certain hangups, right? Like everyone, you know… there's emotion attached to that. The situations which I encounter the most, you know, in families with established wealth,

02:55
it's often an understanding from the older generation that there should be prenups in the younger generation. They're trying to protect family wealth. And in this case, there likely should be a prenup and often is. This concept, where I've seen it most successful as far as not throwing any kinks into the situation, is that it's communicated to the younger generation as early as possible.

03:21
Not when the marriage comes up. The kids know going into the relationship that whenever they get married, there's going to be a prenup. It's just kind of discussed and understood.

Amy Laburda
Right. So it's not about the person in particular.

David Walters
Right. In most cases where I've seen, where families have some wealth, the kids knew before they were ever in the relationship that when they did get to that stage of life, there would likely be a prenup. So, communication, I think, is key at all stages and all steps of this from

03:51
generation to generation, ultimately from spouse to spouse. Basically just avoid surprises. And usually you can. It's not a huge issue.

Amy Laburda
Right. So as you said, a person wanting one is reason enough. They're not going to hurt anything. But you also touched on some factors briefly in my earlier question, about sort of

04:13
indications that a prenup might be a good idea. Can we just kind of slowly walk through some of those things where if one of these factors are in play, yeah, prenup is really a good idea?

David Walters
Yeah. Where family wealth is already established. That's the one I kind of spoke about before, where the older generation has already established a large amount of wealth, and the family is trying to preserve that. If there's a...

04:36
Another one, if there's a big disparity in earning power between the two spouses. If one spouse is obviously going to be a very high earner and the other spouse might not be, that's another situation. Children from a previous marriage can be another reason why you might want to have a prenup, just to kind of settle out some of those issues. Another common one: If one of the spouses is the owner of a business, or is very early in the business, and a prenup might

05:05
certainly be warranted in that situation. There's very famous examples of that, that you hear. Jeff Bezos is the biggest one. He got married, I think it was like a year… it was early in the founding of Amazon and then he got married, or maybe it was a year before he founded Amazon. They ultimately got divorced 25 or 30 years later, and obviously Amazon was the biggest company in the world. That played a large role in how that divorce went, and it was obviously a big issue.

Amy Laburda
So I think for listeners who

05:31
caught our estate planning episode when you and I talked last season, some of those factors, like kids, businesses, sound pretty familiar. And I imagine that really you're thinking about, like when someone dies, if a major relationship like a marriage ends, you're probably feeling a lot of big emotions. There's probably a lot going on. So it seems like part of the point of a prenup is making decisions before you're feeling all those big emotions. Is that right?

David Walters 05:57
Absolutely. It's not a difficult concept to grasp that one or both of you might not be in the best mindset when you're going through a divorce, the most rational mindset. So, do you want to be making decisions as a couple under that scenario? Or would it be better to discuss and plan for those things ahead of time, when everything is still wonderful and there's no marital [discord]? So, in the absence of a prenup, I don't think either party, you know, regardless of their mindset during a divorce, would want a court

06:26
making decisions for them. Because in the absence of a prenup, in a contentious divorce, that's what can happen. I would also say marital attorneys love the situation where it's a contentious divorce with no prenup. That's who benefits in that situation, not the couple. So again, I always come back to: It's just sound planning. You plan for events that you don't think are going to happen, and that's what prenups are about.

Amy Laburda
So

06:53
say you've convinced a listener, or a listener came in knowing that they're already thinking about a prenup, but [they] don't really know how to bring it up to their partner. We already sort of touched on families where it's the expectation from the jump. But if you're in that position where either you've decided that it's a good idea for yourself, your family has the expectation, whatever the case may be, and you want to bring it up, do you have any sort of do's and don'ts to keep in mind?

David Walters
Yeah. Communication, always the key. Early communication is...

07:21
you know, goes into that, right? So again, surprises are your enemy here. So if it's communicated, or kind of understood, maybe not talked about in depth, but at an early stage of the relationship that like, yeah, if we ever get to the point where we're getting [married], like, it's just kind of understood. Those are the situations I've been involved with where it really hasn't been an issue, because all parties knew getting into this that there was going to be a prenup and that it was never

07:49
viewed as something that would be contentious or an issue. So like I said, if it's an understood thing, then it's just another step of financial planning that a couple needs to do. There's some definite don'ts as far as communication, like making ultimatums to your partner. I would say be clear that it's important to you, or in most cases, important to the family. Often, it's not even coming from the younger generation. But if it's understood

08:16
that this is from the older generation, that can make it more palatable to the other spouse. Like it's just like, “Hey, look, my parents have told me from a young age that this is going to be part of it when I get married.” That can take the pressure off the spouse who's telling the other one that they need to have a prenup. But be understanding and listen to the concerns of your spouse, and have an open mind about it and kind of where they're coming from, because it can be an emotional thing.

08:45
And on that ultimatum point, of course, don't just come to them for the first time saying, “Here's the agreement that has been drafted, like, read this over and kind of take it or leave it.” As with anything in marriage, you're a team now, or going to be a team. That needs to be kind of thought of and crafted in that mindset. So it's not just one spouse dictating to another. That's usually never going to end up in a good way.

Amy Laburda
Right. Presumably you love this person and so you don’t want to treat them like

09:14
you know, Apple treats you when giving you the terms and conditions of —

David Walters
Right. Empathy is a good thing. Like I said, having them, you know, understanding where the other spouse is coming from, especially, like, in families with wealth. Often when the other member is coming into this family and has none of that history in their own family, this can all be very new to them, and they might not understand a lot about it because it hasn't been something that's been discussed or talked about. They just know the word prenup and like, ooh, that thing, yeah.

09:44
That doesn't sound good. So be understanding and know that you might have to bring them along in this process a little bit, too. But if it's talked about calmly and transparently, then it doesn't need to be a problem.

Amy Laburda
You're never going to get any argument from me about the value of communications.

David Walters
Right. I mean, I'll go back to that probably 20 times. After each question, you'll be like, communication is the key. Communication is the key.

Amy Laburda
Yep. All right. So say you've communicated well. You're on the same page. You're both ready to go.

10:14
But, you know, first marriage, you may not be sure where to begin. What are the concrete steps you should think about taking when you start putting together a prenup?

David Walters
You're obviously not drawing this up on a napkin or doing it yourself. You need to find an attorney, right? That's who's going to draft this thing. And more importantly, each spouse needs to have their own attorney, have their own legal representation. Typically, you don't want the same attorney representing both sides.

10:37
So — and on that point, you won't be in this alone, right? You'll have legal counsel telling you what's appropriate, inappropriate, standard, not standard. They can kind of, you know, obviously a marital attorney will help guide you through this process. So no party in a prenup is going to be on their own trying to figure this out. An attorney will tell you, you know, the keys to, you know — disclosure, you have to disclose all assets and debts, you know, certainly material assets and debts. It's not only the right thing to do, but

11:06
hiding anything during the prenup process could invalidate the document later. If it comes out later that it wasn't full disclosure, well, the entire prenup might get thrown out the window, which is obviously not what you want and counterproductive to the whole thing. In addition to assets and debts, you may want to include projected income. Like if I said, there's a big disparity between the two parties, that could be one thing that might be in there. You want to understand…

11:32
Preenups are, you know, it's a state law issue, right? So you want to — and there's differences in each state — do you want to understand what the differences in… Well, let me re-say that. You don't need to understand what the state, what the differences in state law is, but your attorney will, and they'll be able to guide you through that process. So each state has its own particular issues and aspects when it comes to prenups, and the attorney will make sure, presumably, that all those are handled correctly. So it's not something you need to educate yourself on, but be aware of it.

12:00
The other thing that comes to mind is just the timing factor. You don't want to be scrambling to do this right before the wedding. And actually, that also can be a factor that would make a prenup invalid, as if it was rushed and signed like the day before the wedding. You've got to give yourself plenty of time, because that can be viewed as coercion, like you've got to sign this before we get married. And that can invalidate a prenup. So give yourself plenty of time, at least 30 days. But even then, ideally, get it done more than that before the wedding.

Amy Laburda 12:30
Yeah, presumably you've got plenty to do in the 30 days plus before you get married.

David Walters
Right. You don't want to be dealing with the prenup right before the wedding, right? That's another situation where it can put a bad taste in people's mouth.

Amy Laburda
Yeah. So we've touched on some things that could make a prenup invalid legally. And obviously, as you said, your attorney will help you keep an eye out for those. But coming at it as a financial adviser, do you have any sort of things that you generally think are a good idea to include or things that are a bad idea to include?

David Walters
Sure.

12:58
All prenups are going to be unique in some way, right? Every relationship is different. Every situation is different. That said, the doctrine of fairness is a big one. Don't approach the prenup from a position of: I'm trying to win this. This isn't a competition. And again, you mentioned before, this is the person you love. You're going to get married to them. So approach it from a level of fairness, not trying to just get every little thing I can, but do what's fair.

13:26
Do what's appropriate. And again, your marital attorney can help in that process, too, by saying… They know what's kind of the standard, right? So if you're doing something that's nonstandard, they would probably let you know that, like, “Well, that's not going to fly in a prenup” or something like that. But the idea is that both parties, in the event of a divorce, both parties should leave with their finances intact. You're not trying to make someone… You don't want to have someone walk away, just destitute

13:56
after this process, right? Because another thing about prenups that would potentially not be valid is one that is so disadvantageous to one party, a court might not even enforce that. So that could be another thing that makes a prenup invalid, is if it's just not reasonable. Good prenups, I would say, are clear and simple. Stick to basic financial and legal issues. And that's what I'm kind of getting at: What would you not want to include,

14:24
to a certain extent, and we can get into that later. But the basic provisions you would want to include, you know: What will trigger the agreement is something that is fairly simple, but it needs to be defined, right? Is when someone files for divorce when a prenup is triggered? Is [it] when the divorce takes legal effect? So that'll be in there. Other things I often see is: Will the un-moneyed spouse, would they maybe vest in some of the marital assets

14:52
as time goes? So that's kind of the mindset there is that, well, if there's a quick divorce after the marriage, well, perhaps the spouse shouldn't participate to a material extent in any of the assets. But you can have a vesting schedule where it's like after five years or 10 years, they might vest in some assets. That's one thing I've seen. In the prenup will be… another thing will be the definition of like, what is individual property and what's joint property.

15:19
That'll be defined, and is something that will be discussed with the attorneys extensively. You've got to define what property is subject in the prenup. Another thing that people don't often think about is professional licenses. Those actually need to be — any professional designations or advanced degrees, do they need to be considered? And whether the spouse that doesn't have the degree, whether they have some interest in it, if they, in a sense, participated in you getting that degree.

Amy Laburda
Can we dive a little deeper into that one? Obviously

15:48
those licensing or degrees don't come with, like, a dollar amount attached the way that you know stocks or other assets would. What are we usually talking about there in the prenup?

David Walters
It's a weird concept, right? So the theory is that if a degree was earned or obtained during the course of the marriage, the other spouse may have some financial interest in that. Now, why would that be? The idea is that if your partner helped pay for training or education, they might be sharing that in some ways.

16:15
If you plan or if it's known that you're going to pay for the degree yourself, you might want to specify that in a prenup and like carve that kind of thing out. But that's the theory, is that if they helped you obtain the degree in some way, particularly in some financial way, they might need to be compensated for that. For lack of a better word.

Amy Laburda
OK. Interesting. Yeah. All right. So you mentioned that we'd come back to things that you don't want to put in a prenup, not necessarily because they're illegal, though

16:41
we can touch on that too. But things that are just a bad idea or introduce problems that you don't need to introduce.

David Walters
Number one thing that a lot of people think is a prenup that often shouldn't be is provisions regarding the children that you might have together. That's not really something you want to dive deeply into a prenup. So you don't want to discuss the plans for how many children you may have, how you plan to raise them. What should be obvious things, like you don't include things like whose

17:08
family will you spend major holidays with. That's not something you're negotiating in a prenup, nor should you, for obvious reasons.

Amy Laburda
Right. You should talk about it, but not put it into legal documents.

David Walters
Talk about it in your relationship. But that's not something you should be hashing out legally and setting in any sort of legal document. Not only would the courts deem it frivolous. And believe it or not, other things I've seen, not personally, but just in the industry is like,

17:34
who's going to be responsible for what as far as, like, chores or just various responsibilities in a relationship, right? That's not, that is not going to be in a prenup. It wouldn't be enforceable. And that could be another reason the court might throw out a whole prenup, is if you have ridiculous provisions in that.

Amy Laburda
Right.

David Walters
So like, in my opinion, keep it simple, basic and well-defined. Ambiguity is not your friend. Things that can be left open to interpretation just … only cause issues. So

18:04
and that's almost why it needs to be simple, and not delve into any of these more complicated things that would just raise more questions.

Amy Laburda
Makes sense. Now you mentioned you don't want to talk about future children you're going to have together, but you did bring up pre-existing children that one or both of you brings to the marriage. Is that a thing that you should really put in a prenup?

David Walters
There are… When there are children coming into the marriage, that's definitely so. Yeah, I view that as kind of a different category as it pertains to children. So

18:34
things that could be discussed in the prenup, in that case, is plans for custody and visitation in the event of a divorce, that could be in there. You technically can include details for future child support. In my experience, it's usually better to say that you'll determine those arrangements by mutual agreement later. And that often can slow up a prenup process, too. So it's, like I said, often better to just kind of punt on that and say that'll be negotiated in the divorce.

Amy Laburda 19:04
OK. So I hate to tear you away from the fun of prenups, but we did want to zoom out a little bit in this episode and talk about marriage more broadly, as a financial planner, if we can. So if you have clients who are getting married, or their kids are getting married, people in their family, what does a marriage mean for someone's financial life?

David Walters
That's such a broad and open question. I mean a lot of things, but at its most basic:

19:29
Two individuals are merging their lives into a single financial unit, in a lot of ways, not in every way, but that's kind of the thing. You're no longer thinking for just one, or as one, nor should you be. You're working as a team now. Finances can be a source of tension between couples. So I'll jump back to the communication. Starting with frank and honest communication is important to getting a marriage off to the right foot. Right? We all know that. We all intuitively know that. And financial discussions are no different.

Amy Laburda 19:59
So without betraying any confidences, as a financial adviser, have you seen firsthand that that communication has sometimes not been there, and it's caused immediate problems for a couple?

David Walters
Yes. It certainly can add unneeded complications, right? I mean, we're human beings. And even if it's unintentional, there can be power dynamics involved with a lot of the stuff that we're discussing, especially in situations of like one family with significant wealth and another not.

20:28
So what will I step back to? Communication, honesty, really key in my view, not only in a marriage, but these financial aspects of a relationship. Couples that have that as their core dynamic can usually work out anything. Those that don't will run into issues. And I'm speaking strictly on the financial stuff here, but it still always comes down to that kind of, those simple concepts, communication,

20:54
early communication, no surprises, fairness, like treating your spouse like you would want to be treated if you were in that situation.

Amy Laburda
Yeah. I imagine — we've talked in other venues before about family meetings, and just in general, obviously money can bring up emotions for a lot of people. It can be sort of a thorny thing. But it seems like sort of starting off on the right foot together means being able to broach those conversations, to sort of getting used to talking about those sort of things. So I imagine similarly, even if you're not drafting a prenup, sort of

21:24
being upfront and honest about assets you have, debts you have, or inheritances you expect, that kind of thing, is really going to build you a firm foundation.

David Walters
Right. Sharing information, being open and transparent: That, in my view, is very important. That doesn't mean you're sharing in the assets. That doesn't mean if you have family wealth… you're just keeping your other partner informed as to what the overall financial situation is.

21:52
And I won't opine on any level of detail. And often, you don't need a great level of detail. You want to be open and communicate with your spouse because that's obviously something, as you move forward, is going to have a big impact on both of your lives. So just kind of understanding that plan as a family unit, or at least having some insight into it, is helpful. So the surprise aspect of it

22:18
comes in there too. Surprising a partner later in their relationship with anything, like big debts, bad credit, hidden assets, that's only going to cause problems. So just get it out there, right? Get it out there and discuss it.

Amy Laburda
Yeah, I have to imagine in most situations, you know, saying upfront, “Oh, hey, I've got this major student loan debt. I've been working on it, I’ve got a plan,” whatever, is way less of a big deal than you get several years into a relationship, and then it somehow just comes up and blindsides the other person.

David Walters 22:47
Absolutely. And it at least allows you to, you know, even if you don't have a plan for it, right? Or even if you haven't been paying it down, it at least allows you to address it and plan it as a couple, right? Because, you know, then at least, then your significant other knows it's out there and it's something that needs to be planned for. If they don't, you know… That can end the relationship, right? If someone didn't know about something like that, and then it was thrown into their lap years later, they're not going to feel good about that.

Amy Laburda
Yeah, for sure.

23:17
So I think, when we're talking about assets generally, we touched earlier on the difference between joint and individual property in a marriage. I think one thing that comes to mind for a lot of couples who are taking a major step together like marriage or owning a home is whether they should have individual or joint bank, investment, monetary accounts. Do you have advice as a financial adviser as to whether a couple should have joint or individual, or is that just down to each relationship?

David Walters 23:45
I would say the latter. Every couple's different. Every individual within a couple is different. So clearly, that's another thing that should be discussed. There's no right or wrong answer, in my view, when it comes to that, because you want to personally fit it to your personalities, the way you handle your finances. And whether you have joint accounts or individual accounts, again, you're still going to be working as a team and as a family unit. So it's a topic that should be thought about and discussed.

24:14
Most often, and the way I've done it personally is, most often, some joint accounts at least will be created, I would think, and more for change as the relationship continues. Right? So like as you first get married, you might be more apt to have some individual accounts or mostly individual accounts. And then as the marriage continues, you might further join your finances. But just like having a joint account to handle every… day to day living expenses, for example, you know, that,

24:42
in my view, makes things much easier, then you don't have to discuss every little thing, right? Like, who's paying for this? Who's paying for that? Like, oh, we're not, you know. But it's really, and you know, that's kind of my personal view on it. But again, I want to step back to, there's no right or wrong answer. I've seen plenty of couples who kept all individual accounts and communicated very effectively about it, and had kind of like...

25:06
here's the split of how we do things. But like I said, most couples I see eventually start morphing their accounts into more of just like a joint financial thing. Even with that, like, let's say you're on board with the joint stuff, there's very likely some accounts that will likely stay individual or maybe should stay as individual accounts, even in the joint financial picture. So often, like I said, money is… with wealth. Wealth that's being inherited or transferred down to the next generation often might be kept separate from

25:36
the other joint accounts that you guys are both contributing to with your income. So even in a joint account situation, you will often have separate individual accounts for any number of reasons.

Amy Laburda
Yeah, makes sense. Or retirement accounts for your workplace.

David Walters
Exactly. Those have to be individual.

Amy Laburda
So when we're talking about ownership as a financial planner, in certain parts of the country, the concept of community property is in play. Obviously, this won't apply to everyone, but for listeners who aren't familiar, can we just briefly touch on what that is?

David Walters 26:05
Yeah, I mean, that's a whole other podcast, probably, community property. But at its very basic — and there's nine states, I think, that are community property states. If you're not sure if you're in one, Google it. It's Arizona, California, Idaho, Louisiana, Texas, Washington. There's a few more. But there's nine states. What that means is that any income… So in a community property state, any income earned during the marriage

26:34
is essentially considered both spouses’, it’s joint income. Even if you segregate it in a separate account. If it's earned during the marriage, community property states view it as more joint. Property obtained prior to marriage, or like inheritances, are still generally considered separate. But that's kind of what community property is, is that stuff accumulated during the marriage, other than those gifts or inheritances and a few other things, is generally considered joint property, even if you segregate it into separate accounts.

Amy Laburda 27:04
So besides how you'll own things — together, individually, a combination — I imagine most couples want to talk about sort of the basic things like budgets and savings, which I discussed with our colleague Rebecca Pavese earlier this season. Obviously the specifics are going to vary a lot for that, depending on your situation, your temperaments. But do you have any sort of broad-based advice about how to deal with conversations about just the nuts and bolts of how you are going to deal with money together day to day?

David Walters 27:31
I mean, it comes back to the obvious one about being transparent, right? Open dialogue and honesty. Like how can you have those conversations, and at least have them be productive, without those things? The other aspect I think of when I think of that is like: Revisit it, right? Maybe set up times to revisit it if you're not that good about just naturally revisiting these conversations, because things change over time and during a marriage. People earn more money. It's not like you just have these conversations once and then like, all right, that's it.

Amy Laburda 27:59
Yeah, obviously you may have kids eventually.

David Walters
Right. And nothing is ever set in stone. You might try one thing. When you come back to joint and separate accounts, you might say, “Ah, we want to keep everything separate.” And then a year later, you're like, “Ah, I don't want — let's get some joint accounts, because that'll make things much easier.” So nothing's ever written in stone. And you want to revisit it. So I've seen some families actually schedule a quarterly or an annual meeting, just like, all right, here's the time, especially at the end of the year, for example.

28:27
Here's the time where we'll sit down and, like, look at the picture and discuss these things. I would say on the communication, discussing these things can be hard, right? Nobody, often or many people, don't like to talk about these things. But if you make it a regular part of your dialogue, it becomes less and less daunting. Maybe the first discussion, you're not totally comfortable. After you've had those discussions three or four times, it's just part of your communication as a couple and your planning as a couple.

Amy Laburda
Makes sense. I'll throw one at you here.

28:56
As a financial adviser, do you sometimes find yourself as a person that a couple will bring in to try and facilitate those conversations? Do people come to you for that service, or do people usually figure out the nuts and bolts and then just come to you for higher-level things?

David Walters
Both. And often, I think people will come to their advisers if they're maybe having difficulty communicating about it between themselves without...

29:21
kind of, I don't want to say a mediator, but someone who's just very familiar with these conversations and can help guide them along, as kind of like an independent third party. Or, especially if a couple just doesn't have a lot of experience doing like budgeting or stuff like that, they might come to their financial adviser, not because there's any sort of disagreement or tension between the two of them, just because

29:45
it's helpful to have a financially minded person holding your hand through the process, so that it just aids in your conversation. So yes, your financial adviser can definitely be an assistant in this process.

Amy Laburda
Sure. So, before we start to wrap up, I do inevitably have to touch on death and taxes. Sorry to everyone for that. But let's start with the harder one first. Talk about getting married and how it affects your estate planning.

David Walters 30:12
Well, again, like you said, that's a whole other topic for a different podcast.

Amy Laburda
Yeah, you don't have to add a whole podcast.

David Walters
I think we did a podcast, like our last podcast was on, like, estate planning. So if you haven't seen that one, go back to that.

Amy Laburda
We did, and I will link that one in our show notes if people want to go back and catch that one.

David Walters
Right. But so the obvious things when you think about getting married and like, all right, well, what do I need from a planning perspective? The first thing that's going to come to your mind is a will. So you might need a will or to update the will that you had in place

30:42
prior. I would say this is especially critical if you have children.

Amy Laburda
Sure.

David Walters
Again, you know, like, when there's children involved, guardianship is the main thing you should be thinking about, or one of the main things you should be thinking about, when you're drafting a will. I've never met a couple who wanted a court to decide who and how their children will be cared for if they die. So like, that's just number one reason, not even necessarily financially based, but why you should maybe have a will.

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That's inevitably going to lead to questions of how you as a couple should distribute your assets. Sometimes that can be very simple, in a sense. Married couples can leave property to each other. I would say especially if you're young, when you're working with your attorney, you don't necessarily want to get too bogged down in some of the minutia of it, especially if your main goal is just to get guardianship in place. The attorney can guide you through that. When you're doing a will, you may want to make your new spouse the executor of the estate, so the one that is going to administrate and handle the estate.

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You very well may want to update the beneficiaries of things like your retirement accounts, life insurance policies. Presumably you want to include your new spouse in those. In some cases, if you don't want to, you know, if you want to keep the designations the same, you might actually need your spouse's consent to do that. So you'd want to make sure you have that on file. Insurance, you know, I mentioned like changing beneficiaries on insurance, but insurance as a whole is something you want to probably reconsider as you get married, you know.

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Do you now have life insurance needs, or different life insurance needs, than you had before? As it pertains to health insurance, you might be adding one spouse to health insurance policies. It's usually more economical or effective to have, like, a family policy as opposed to maintaining individual policies after you get married. Part of the estate planning and process of, like, doing a will, often you will maybe have health care proxies or durable powers of attorney.

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Those are the documents that just let your spouse handle financial matters or make health care decisions if you're incapacitated. Those are the basics of estate planning that you probably now want to consider if you're getting married.

Amy Laburda
Yeah. And obviously everyone's situation is different. As you said, this could be its own separate podcast, but —

David Walters
Yes. It is its own separate podcast, as we alluded to earlier.

Amy Laburda
Yes. So we've touched on death now. Let's briefly touch on taxes, which similarly

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could be its own whole podcast. But for people who have gone from single to married, what do they need to keep in mind when tax time rolls around?

David Walters
I mean, there's a lot of minutia you could get into, so we won't get into … like there's 100 different things that could be a little bit different. But the gist of it, I mean, it probably means you'll be filing joint taxes after you're married. That's usually the most tax efficient. That said, some couples may want to consider filing separately, particularly those that have the mindset of “We want to maintain our

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our finances separately.” Often with that mindset comes, well, like, I want to be, I want to pay the taxes on my income that I've earned. So you might be filing separately, even if it's less tax efficient. But there are other reasons why you might want to file separately, aside from that. So for example, if one of the spouses doesn't make a lot of money, but has, like, student loans and are on an income-based repayment plan.

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That's a very common thing that I see where they will file separately, because the payments on that income-based repayment plan can be based solely on your own income as opposed to the joint income of the couple. So that's another one I see where filing separately might be in the picture. But aside from the differences that are unique to you, which you can talk to your accountant about, I would encourage, like, “Hey, we're getting married. What should we be thinking about?” But

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generally, it just means you're probably going to be filing joint taxes now, which might save you a little bit on tax.

Amy Laburda
Never mad at that. Just to briefly touch on sort of the center of the Venn diagram between estate planning and taxes: For people who might be subject to gift or estate tax, how does marriage affect that for them?

David Walters
Well, the one nice thing about being married is you can give your spouse… There's no limit on what you can give your spouse. It does not cost estate tax. It does not use your lifetime exemption

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or anything like that. The one thing that does come to mind, this is kind of specific, but where one spouse is not a U.S. citizen, that's not the case. There's an annual limit on how much you can give to a non-U.S. citizen. I think it's $190,000, and that changes with inflation, I think, or that changes periodically. But marriage can affect people's taxes in so many ways, many very specific to their

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unique tax situation, that I just broadly encourage you to sit down with your accountant to go over any things you should be thinking about.

Amy Laburda
Absolutely. So we've covered a ton of ground already, but before we wrap it up, I just want to hand it back to you and ask if you have sort of any broad closing thoughts or advice for couples who are planning to get married, or have just recently gotten through their wedding.

David Walters
I guess I'm just going to say it one last time, for like the 10th time, because that's how important it is: open dialogue, honesty, understanding the other person's position.

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These are all good policies in a relationship about any subject, but especially on finances. If you keep that mindset, there's really no hurdle that can't be overcome.

Amy Laburda
I don't think we're going to do any better than that. Sounds great. David, thanks so much for coming back on the podcast. It was really a pleasure talking to you today.

David Walters
All right. Thanks, Amy.

Amy Laburda
“Something Personal” is a production of Palisades Hudson Financial Group, a financial planning and investment firm headquartered in South Florida.

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Our other offices are in Atlanta; Austin; the Portland, Oregon metropolitan area; and the New York City metro area. “Something Personal” is hosted by me, Amy Laburda. Our producers are Ali Elkin and Joseph Ranghelli. Joseph Ranghelli is also our director, editor and mixer. Our firm has written two books: Looking Ahead: Life, Family, Wealth and Business After 55 and The High Achiever's Guide to Wealth, which offers advice for younger professionals,

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entrepreneurs, athletes and performers. Both books are available on Amazon, in paperback and as e-books.