Time was when husbands used to joke that "what's mine is ours, and what's hers is hers." That was an era when men were the major breadwinners in married couples and when the wives who had jobs often said they were working for "pin money." Today, younger people–including younger boomers–are singing a different tune. And it's no joke. The new message is: "What's mine is mine, what's hers/his is hers/his, and what we put in the common pot is ours."
Financial advisors say they are definitely encountering couples who maintain separate finances along those lines. The old "joint account" approach for everything is no longer a given.
So, how do advisors work with such couples?
"You have to address their goals, just as with couples using the traditional joint accounts," says Don A. Taylor, PhD., an associate professor of finance at the American College, Bryn Mawr, Pa. He teaches financial planning and was himself a financial advisor earlier in his career.
"And, where there are separate goals, you have to address them."
For instance, if the wife wants to retire at age 55 but the husband wants to keep on working, that needs to be factored into the planning and arrangements, Taylor says.
(With non-married couples, the goal assessment would be the same. However, "non-marrieds should also establish a property agreement up-front, so if there is a split later on, the two won't have to sort through who gets what," Taylor cautions.)
Having separate finances is not necessarily a bad trend for the financial advisor, points out Keith Newcomb, a wealth manager with Full Life Financial LLC, Nashville, Tenn. For instance, it can be an advantage in making use of the annual exclusion amount for gifting and the Unified Credit for estate taxes.
In fact, he says he sometimes encourages older people who are accustomed to joint-titling of assets to consider separate titles.
Some older clients are not comfortable with re-titling separately, he allows. "They may have had a joint bank account, joint brokerage account and join ownership of the family home for years," he says. "However, when it makes for greater tax efficiencies, most do settle things."
It is the younger boomers and people in generation X who are more inclined to have separate accounts from the start, Newcomb observes. "We know about it only anecdotally. But I am seeing it more frequently than in the past."
In his experience, the reasons for the separate ownership are varied. Some people waited a long time to get married, so they are comfortable having their own accounts, he says. "Others have gotten remarried and don't want to blend assets. In other cases, the spouses both work and they like having a sense of separate contribution to the wealth of the household."
Also, the relationship dynamics are a factor, he says.
When it comes to funding retirement assets such as long term care insurance or an annuity, the advisor needs to work with the couple to determine how much each will contribute, suggests Taylor.
"For instance, will the funding be based on the proportion of income that each spouse brings in? Will it be paid for at the employer through payroll deduction? If it's a spousal IRA, who will pay for it?"
When incomes are disparate, there may be greater need for discussion about who pays what, he says. "But there should be room for negotiation and compromise. Maybe, if the husband earns more, he will pay 60% for her LTC policy and she will pay 40%."
Taylor recommends taking a holistic, portfolio approach to such questions.
Present the issue from a "retirement is ours" position, even if assets are divided when going into the planning, he suggests. Also, take a look at the past history of how the couple has funded things in the past.
"Emphasize that this is not a 'yours' and 'mine' part of their lives. Encourage them to think of their investment horizon and what is right for them as a couple."
