Couple sitting on their front porch discussing their estate planning basics to ensure they're aligned.

March 06, 2019

Estate Planning Basics: 6 Financials Couples Need to Share

Intentionally or subconsciously, it's common for one or both members of a couple to have funds and/or debts they are reluctant to share — or didn't think to share — with their partner.

According to a survey from the National Endowment for Financial Education, “financial infidelity" is an ever-growing issue and a potentially destructive force in a relationship.

The study found that “…two in five (41 percent) of American adults who combine finances with a partner or spouse admit to committing financial deceptions against their loved one." The survey also found that three quarters of adults say financial deceit has affected their relationships in some way.

Couples surveyed for the report gave a variety of reasons for their financial deception, including a need for privacy, the possibility that their partner would disapprove of their purchases, as well as embarrassment over their spending habits or their overall financial situation.

Even the most in-sync, open and organized couples are likely to uncover a few hiccups in their financial alignment.

"It's not that couples are trying to deceive one another or hide anything," said Joline Godfrey, a financial educator, author and CEO of The Unexpected Table. "Often, they are just trying to maintain their own individuality, their boundaries as a human being. I think each of us tries to hold on to some sense of self and we each hold back a little something, even if it's unintentional."

But such gaps in knowledge between partners can lead to major problems in the event of disability, divorce or death.

Sitting down with your spouse to align on estate planning basics can be a mentally and emotionally tumultuous process, but it's critical for ensuring both of you are prepared to manage your family's finances with ease should something happen to your partner.

The Importance of Transparency in Estate Planning

Full transparency is essential because not only could deception harm your relationship and leave your partner ill prepared to manage family finances, it can also significantly undermine the estate planning process, said Alma D. Banuelos, CTFA, national head of trust and estate services at City National Bank.

If you and your estate lawyer don't have a complete picture of your spouse's funds, valuables and debts, those assets and liabilities could be unintentionally excluded from a will, making it incomplete and open to a potentially destructive and lengthy legal challenge.

But revealing your whole financial picture in the context of making a will is even more difficult than your average financial conversation, said Godfrey.

“Dealing with mortality puts people in their most vulnerable state, and being completely honest about your financial details can make one feel very naked," she said.

While wanting to avoid such strong feelings of vulnerability is understandable, the time to discover if you and your spouse are fully aligned and work through any intentional or unintentional miscommunication is today — prior to major problems arising after a life event such as disability, divorce or death.

The Assets and Liabilities You and Your Spouse Need to Share with One Another

Making a commitment as a couple to embrace financial transparency is an essential part of smart estate planning.

But it's only the first step.

The second hurdle to creating a solid estate plan is ensuring that neither of you is inadvertently overlooking an asset or liability. It's much easier than one would imagine to forget an important aspect of your estate simply because you don't think about it often or it was something you valued in your youth and it's now been forgotten.

Ensuring that a spouse has easy access to critical information and documents is key to guaranteeing that your loved ones can have a smooth financial transition upon your passing.

Here's a helpful checklist of estate planning basics including personal records, assets and liabilities that should be shared by both parties.

Bank and Investment Accounts and Credit Cards

Create a full list of bank accounts and credit cards and include passwords to access them online or via phone. If you don't feel comfortable keeping a written record of codes around the house, put the list in a safe deposit box and ensure both spouses have easy access to a key. Consider keeping photocopies of your credit cards in the safe deposit box.

Banuelos pointed out that transparency around these accounts is frequently more difficult to achieve with second marriages or unions that occur later in life.

“Full disclosure is not as often an issue with a first marriage, but often becomes a concern in a second marriage," she explained.

"Usually with the first marriage, assuming you got married young, you kind of grow up together and you started your bank accounts and made your big and small purchases together. In your second marriage, however, you come into the union with your own accounts, assets and liabilities. Therefore, it can be tempting to hold onto an account that you had during your first marriage and keep it a secret from your new spouse so you can have a kind of 'play money' fund."

Insurance Policies, Pension Plans, IRAs

Inform your spouse of any plans you may have and go over the main details of each. Ensure that your beneficiary information is up-to-date and reflects your present wishes (i.e. you don't have an ex-spouse listed as a beneficiary).

Digital Assets

One of the most overlooked yet essential items is ensuring that your spouse can access all of your email, social media, financial and digital accounts like PayPal or cryptocurrency marketplaces. Again, if you don't want to hand over printouts, you can keep the logins and passwords in a safe deposit box to be accessed only upon your death.

Your spouse will also need access to things like your computer, tablet and cell phone.

“Digital assets are a critical consideration. Most of us have important things on our computers that we would want loved ones to have, like family photos. If your spouse is in a creative field there could be things like unpublished manuscripts on the computer. You definitely need to catalog those kindds of digital assets," said Banuelos.

“Many estate lawyers create wills that include a standard clause providing the executor, trustee and surviving spouse with rights to access things like social media. But things are a lot easier if you give them your pass codes."

Business Exit Plan

“If one spouse owns a business or part of a business, it's important that the other spouse is aware of what will happen to the business in the event of a death," Banuelos said.

Include your spouse in the creation of your exit and succession plans for your company, especially if their livelihood and retirement is dependent on the income from the business.

Mortgage or Loans

Inform your spouse of any outstanding mortgages and loans and the location of the original loan documents. It's also important to mention and record any outstanding personal debts - for example, if you lent several thousand dollars to a friend and whether or not you were charging interest.

Miscellaneous Documents

Keep legal documents like marriage certificates, divorce decrees, birth certificates, tax returns, deeds and titles to real estate or property in a safe deposit box.

How to Talk With Your Partner

"Men and women in marriages today are generally savvier about keeping track of finances and disclosing potential issues but, in my experience, problems still pop up," said Banuelos. "That's why no matter what your age or who predominantly controls finances, it's critically important to be open about all the assets and the liabilities."

It can be beneficial to begin this conversation with an estate planning team that can articulate the importance of full transparency in ensuring both partners are financially prepared for the future.

If you do uncover hidden assets or liabilities throughout the process, that's okay. The important point is that you're having the conversation now so you can address it as you create your estate plan.

City National's team of estate planners can help you and your spouse create a comprehensive estate plan. To learn more, contact us

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This article is for general information and education only. It is provided as a courtesy to the clients and friends of City National Bank (City National). City National does not warrant that it is accurate or complete. Opinions expressed and estimates or projections given are those of the authors or persons quoted as of the date of the article with no obligation to update or notify of inaccuracy or change. This article may not be reproduced, distributed or further published by any person without the written consent of City National. Please cite source when quoting.

City National, as a matter of policy, does not give tax, accounting, regulatory or legal advice. Rules in the areas of law, tax, and accounting are subject to change and open to varying interpretations and readers should seek professional advice.

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