The way spouses handle money together or separately has changed dramatically in just a few generations.
When I spoke with a group of women 20 years ago, most of the older women in the room claimed to know very little about managing money and that their husbands handled finances. I received an allowance to pay small household bills, but my husband made all the “big” decisions.
If a wife needed anything, she had to ask (or beg) her husband. Many women sometimes created comically deceptive workarounds in response to this humiliating arrangement that was the basis for many mid-century sitcoms.
When Aunt Francine “needed” a new dress, she asked Uncle Louis for extra cash several times a month to pay the utility bills.
If there was a houseware sale, my mom would hide the bag in the trunk of the car or in the basement and bring it out later, thinking my dad wouldn’t notice. One year, the basement flooded during a storm. Before her father returned from her job, she did everything in her power to move the wet woolen rug and antiques she had purchased from the basement and hide them elsewhere.
A tragic shortcoming of this traditional arrangement was that if the husband died or divorced, the wife was surprised to find that she could no longer provide for her family or earn credit.
With the sexual revolution, greater opportunities, and “my generation,” some people didn’t want to share their finances with anyone.
For example, my cousin married the grandson of a famous comedian, and he divided the household extremely. She, along with her children, frequently broke down in an old clunky car with no air conditioning while her husband drove a new Mercedes. As I was having lunch at their house, I noticed that the food in the refrigerator had a sticky note on it indicating ownership. They lived more like roommates than husband and wife, and eventually divorced.
Thankfully, many couples (perhaps in their second or third marriage) have found that they can live better lives as true partners who share their finances. A study conducted at Cornell University this year found that couples with pooled financial accounts tended to exhibit better connections, and their interactions were more positive, stable, and secure. Half have joint bank accounts. For some, everything is shared, including decision-making and financial chores. But should it all be merged?
If you share checking accounts and household chores with your spouse, you know that disagreements can escalate over how to spend your hard-earned money. Fights over who did what can also occur when tasks such as auto-registration updates or gardener payments are duplicated or forgotten. You can become overly focused and talkative about money, especially if you’re tight on funds or trying to maintain the same standard of living as your neighbors and friends.
In some cases, there are good reasons to keep assets separate or have one person responsible.
For example, I have found it difficult when spouses try to cooperate on taxes. The result can be misplaced documents, contradictory information, and witnesses to their (sometimes very personal) battles.
The solution is to check the partnership tax returns. In a partnership, one partner is usually the “tax” partner. She can create separation of duties by naming one of them as her tax spouse. One of the spouses gathers the information, communicates with the tax professional, files the paperwork and reviews the return. The other spouse will help only when needed. Ideally, the spouse in tax matters should have more aptitude for sorting out paperwork and tax knowledge.
While you’re at it, segregate some of the other financial chores, like who pays your bills, renews your insurance policy, or manages your rental, based on your interests and strengths A spouse may be keen on paying bills and likes to adjust checkbook balances. My husband is a good saver, so she saves a portion of our income to manage our investments. you get the idea.
Tax laws have changed and you may be able to save tax (or sanity) by filing a separate tax return. If filing together causes too much quarreling and stress, nothing prevents you from marrying your own creator and filing separately.
If you and your spouse have roughly the same income, filing separately may keep you at a lower tax rate. In some cases, you can also maximize itemized deductions, such as medical expenses, by filing a separate return.
Most tax programs allow you or your accountant to create reports comparing taxes using different filing statuses.
Separating business ownership also has tax, financial, and psychological benefits. Suppose one of your spouses excels at handling the company’s administrative and financial details, while the other is responsible for sales or production. In that case, the managing spouse may operate a management company separate from the other spouse’s (production or sales) company.
In addition to being proud to call myself a CEO and having the freedom to make independent decisions within my own expertise, having multiple types of tax entities means that tax and successor There are also planning benefits. For example, one company is an S-Corp and another is a C-Corp, which can receive various tax benefits.
Always consult a CPA or tax advisor regarding joint ownership succession and tax planning.
Thankfully, you don’t have to manage your finances like other couples. Whether it’s a separation of duties or a bank account on your own side for a little luxury, paying attention and maintaining a little separation when it makes sense goes a long way in a happy marriage.
Michelle C. Herting, CPA, ABV, AEP specializes in tax planning, trust administration and business valuation. She has her three offices in Southern California.
https://www.ocregister.com/2022/09/18/yours-mine-and-ours-why-sometimes-its-good-to-separate-finances/ Why it’s sometimes good to separate finances – Orange County Register