Help Your Clients With This 'Embarrassing' Task Before They Get Married

There's no judgment. No matter the answer, it’s the right answer. It’s about facilitating the dialogue.

What else should be discussed?

Expectations for spending and saving and how assets and debts will be handled. It seems obvious that if you’re a couple, you combine everything. But ownership of an asset can take different forms, and the way they’re divided [differs] in the event of divorce.

Also, what if one person comes into the marriage with significant wealth? How do you handle marital property vs. separate property? Planning is crucial.

Why should couples, especially HNW and UHNW couples, do a prenuptial agreement?

Think about that as an insurance policy. It’s almost like a living will for the marriage.

There’s a very big stigma about a prenuptial. But all it is, really, is a contract between people who love each other about how they see their financial lives together, establishing some guardrails and boundaries and laying out their wishes early on.

It's very important not to see it as, “Oh, you’re asking me for a pre-nup because you don’t believe in our relationship.”

Why is it necessary for couples to have a financial plan for their future together?

Because you have to set clear goals: You want to have a house, a vacation home, send your future kids to the best schools. But how do you accomplish what you want?

Financial life is never static. It’s a living, breathing thing.

When [wants] in the plan come to fruition, it shows you’re the master of your financial destiny: You can get where you want to go with careful planning.

Should a couple discuss retirement planning pre-marriage?

Yes. Start early. Younger couples say, “But retirement is a million years from now.”

That’s when [the advisor] shows them the power of compounding. Over time, [whatever amounts they save turn into] real money, and that’s very empowering.

So is the power of tax deferral and in some cases no tax, as with Roth IRAs [until withdrawals].

What else should couples know about tax planning before marriage?

They should be planning for taxes as a couple. There’s a common belief that filing jointly is beneficial for most married couples, which in most cases is true. But, actually, it depends.

There could be a circumstance where one spouse has a lot of medical expenses, for example. In that case, it would be beneficial, if they also have very little income, to file a separate return.

What other tax issues should a couple planning to wed be aware of?

Someone could marry a businessman [or woman] who’s involved in a lot of deals but their spouse doesn’t understand what those deals entail — and a little voice inside their [head] is saying, “Something doesn’t smell right.”

That spouse has an absolute right to file a separate return because when you file jointly, you’re not only jointly and severally liable for what you have reported on the return — you’re also jointly and severally liable for what you’re not reporting.

So if your spouse isn’t reporting income or has other tax indecencies, you can be held for all those tax liabilities even though they have nothing to do with you.

What’s the best way for the unknowing spouse to handle that sort of situation?

You have to look long and hard before you sign a tax return. I hear very frequently, “My husband deals with the taxes. I just sign.”

That’s a very, very bad approach because there can be a lot of repercussions and implications of “just signing.”