njcpafirm.com: What You Need To Know About Your Spouses Finances

What You Need to Know About Your Spouse’s Finances

Failure to Share Information Can Magnify Problems in a Crisis

Are you and your spouse completely familiar with each other’s financial situation? Are critical documents up to date? Are you prepared if a spouse is incapacitated or dies?

"You need to know where everything is kept and be sure everything is up to date," says Noah Rosenfarb, CPA, managing director of Freedom Wealth Advisors, LLC in Short Hills.

“It's essential to have up-to-date knowledge of the details and location of each other’s financial records and documents,” adds Rosenfarb. Some insurance policies and investment accounts may only have annual statements. It could be months before some kind of notification arrives in the mail. "If you have stock or bond certificates that haven't been converted to digital records, you may never receive any notification," Rosenfarb notes.

Couples also need to be sure that the beneficiaries of any insurance policies, annuities or other investments are kept current. "And, of course, you have to be sure that you have an up-to-date will, power of attorney and health care directive," Rosenfarb says.

Each partner in a relationship needs to be able to answer several important questions about his or her partner’s finances. According to the New Jersey Society of Certified Public Accountants (NJSCPA), these questions include:

Do You Have a Will?
Both you and your spouse should have a will that is kept in a safe place that you both can access, such as a fireproof home safe or a bank safe deposit box. CPAs also recommend that each spouse provide the other with a health care directive and a power of attorney that will allow them to make important decisions. A will makes it much easier to settle a deceased spouse’s financial affairs. The other documents become very important in situations where a spouse is disabled. And, be sure to update these documents any time each of you has a major life-change event. It's not uncommon, for example, for the husband in a second marriage to die and have a will that was never updated to recognize his new wife. The effect of this kind of situation can be devastating for families.

Retirement Accounts?
What kinds of retirement coverage does your spouse have? In the case of death, it’s up to the surviving spouse to follow up with Social Security and any private retirement plans or accounts in order to receive payments. Know the names, account numbers and contact numbers for any pension plans for which your spouse is eligible from a former employer and for any 401(k) or individual retirement accounts. You should also know your spouse’s Social Security number and what benefits you are eligible for as the surviving spouse. Be sure that beneficiary information is current.

Insurance Information?
Does your spouse have life and health insurance? He or she may be covered by a life insurance plan through an employer, as well as any plan that your family has purchased. Again, know the name of the insurance company, the account number and contact information for all life insurance plans.

You’ll need to know the same details about health insurance plans. They will be important if you are covered under the plan as a surviving spouse. In addition, some health insurance plans require advance authorization to go to the hospital or otherwise respond to a medical emergency. Be aware of any such requirements so that you can easily follow them if a crisis occurs.

Current Bank and Credit Accounts?
Are you aware of all your spouse’s credit card balances or checking or investment accounts? Many couples maintain their own accounts, rather than pooling their money in a joint account. That’s fine, but there are many good reasons that each spouse should have some idea of the other person’s financial situation, even if each one manages his or her own money.

Money is a serious cause of stress in many marriages, and communication can help ease potential problems. If you have a thorough understanding of your family’s financial situation, you’re in a better position to create realistic budgets and plan for the future. In addition, in the event of a death or divorce, it’s better to have a well-informed understanding of your complete financial situation.

Our Office Can Help
Many of the questions raised here address basic issues that are important to sound financial organization, such as writing a will and having up-to-date knowledge of your family’s credit, retirement and insurance details. That’s why it’s important for couples to share information and be familiar with their combined circumstances.

When you’re well informed about financial details, you’re better able to make the best decisions for your family. Our office can help.

Contact our office to start a dialogue about these matters. It's a great idea for you and your spouse to do this together.