You trust your spouse — why wouldn’t you? But blindly allowing one party to make all the family’s financial decisions can create opportunity for dishonesty, debt, and ultimately divorce. Find out what you need to know about finances in marriage, and what could happen if you ignore warning signs about your family’s money.
Why Combine Finances After Marriage
When you get married, “yours” and “mine” becomes “ours,” at least for anything earned or purchased going forward. California is one of 10 “community property” states. Anything — assets and debts — accumulated during the marriage (or domestic partnership) belongs to the community as a whole, not the person who earned it. When a marriage ends in divorce, that community property is generally split evenly, with each spouse receiving 50%.
That’s why it’s useful to combine finances after marriage. Having a joint bank account for bills and a joint savings account for large purchases can give you shared expectations about finances in marriage. While some couples choose to maintain separate accounts, that money is still “community property” in most cases. If you can’t see what goes in and what comes out, it can lead to differences later on.
Maintaining Separate Property
The community property rules apply no matter whose name is on account. However, there are some exceptions to community property. In a divorce, each party is entitled to keep their own separate property, including:
- Property owned before the marriage
- Property purchased with separate property assets
- Income from separate property assets
- Gifts and inheritances given to one party
- Property obtained after separation
However, this separate property only remains that way if you keep it separate. If you “commingle” premarital assets with community property (such as depositing your wages after the marriage into your separate bank account), it can become difficult to “trace” the parts that remain separate property, and you risk the whole asset being divided during divorce.
Avoiding Community Property Laws Through Prenuptial Agreements
There are some situations where community property isn’t the best approach for a couple. This is especially true when one spouse has interest in a family business, or children from an earlier relationship they want to protect.
In these cases, you and your spouse can sign a prenuptial agreement (before the wedding) or a post nuptial agreement (after the wedding). This private contract can replace some California divorce laws, including directing how you want your property divided if your relationship ends.
Ignoring Finances in Marriage Can Lead to Trouble in Divorce
It is common for couples to leave finances up to one spouse or divide up the bills. But ignoring the other spouse’s financial obligations can result in surprises once your spouse dies or you file for divorce. You may find:
- Your spouse has a gambling or shopping addiction and has spent down community assets
- Your spouse has taken on new debt you didn’t know about (and will be responsible for)
- There are tax liens on your property
- Your spouse attempted to hide assets from you and the court
Tips to Manage Finances in Marriage
1. Talk About Your Financial Habits Early
Some people are thrifty; others spend freely. Knowing and respecting your spouse’s relationship with money is important to avoiding marital conflict. By talking about your financial habits together you can avoid placing blame when money runs short.
2. Set Shared Financial Goals
What are you working toward? Do you want to buy a home or take a vacation? Setting shared financial goals can help both spouses treat money as “ours” to be used toward a common purpose. This is especially true in single-income households, where the working spouse may come to resent the way the homemaking spouse spends money.
3. Create a Household Budget and Review it Regularly
Having a budget for necessities and luxuries is important. Without it, neither spouse can see clearly where the money is going, and where cuts can be made when needed. Budgets don’t have to be restrictive, though they can be. However, knowing where your money is going can help you prioritize what is important, and identify unexpected spending before it gets out of hand.
4. Don’t Allow a Controlling Spouse to Cut Off Financial Access
In some relationships, one spouse exerts power and control over the other, including their access to money. This is a form of domestic violence. It can leave the submissive partner without the financial means of supporting themselves or leaving the relationship. If your spouse wants to remove your name from joint accounts or give you a small “allowance” think very carefully about why before saying yes.
5. Avoid Letting Your Spouse Micromanage Purchases
Many of these tips involve monitoring spending, but it can also be easy to go too far. When money is tight, your spouse might question every penny spent. Since this micromanaging can be upsetting and can also lead to lack of enjoyment of activities you once loved, it is important that each spouse has some “fun money” in the budget. This is a budgeted amount every month that can be spent freely without judgment from your spouse!
What to Do if Finances are Straining Your Marriage
Money problems are one of the most common reasons people get divorced. Stress over finances in marriage can quickly break down the marital relationship and leave spouses blaming each other for the loss. At ADZ Law, LLP, our divorce attorneys understand how important finances can be in deciding when, and whether to leave your spouse. We can help you review your assets and debts, discover hidden financial information, and negotiate a community property division that will allow you to move forward with your life. We invite you to contact ADZ Law, LLP to schedule a consultation to learn more about our team, and how we can help you with your divorce.