Are you in a relationship where you have far more wealth than your partner or spouse (or perhaps vice versa)? It can make it hard to figure out how to live your life together, can’t it?
If you acquire your wealth before you meet or get serious with your partner, it’s pretty logical that you would develop the sense that “this is my money.” Now you’ve ended up in this committed relationship—maybe married, maybe not—where so much of your life is now “ours.”
You struggle with how to think about your money. Is it also “ours”? Should it be “ours”? Or is it still “yours”? It’s both a legitimately difficult logistical issue in some cases and definitely a difficult emotional issue. Because there are both legal, logistical, and emotional issues involved, there is no one answer for all couples.
Hopefully I can help you get a little closer to the right solution for you and your partner/spouse/boo.
(For now, I’m ignoring the issue of acquiring wealth during marriage. I consider that a different matter. Who “owns” what of that wealth is less clear, both legally and emotionally. It depends heavily on the laws in your state, whether you have a marital agreement, what it says, and also your values around money and marriage.)
Protecting Your Money, and Figuring Out If and How to Share It
Any time you start meaningfully financially entwining yourself with your partner, I highly suggest you have a legal agreement that dictates how it works. As long as your relationship continues healthy and happy, there will likely be no problem. But if the relationship ends, and you and your partner don’t share an agreement on how the split of your finances will happen, problems—big problems—can arise.
If you’re not married to your partner and you haven’t bought anything big together (like a car or house), then you’re not particularly “entwined” in this way. And you needn’t worry too much about your partner having legal claim over your money. (Remember, I’m not a lawyer. I suppose there are probably legal ways for an unmarried partner to lay claim, but in general, if you’re unmarried, you don’t have much of a claim.)
Getting married is perhaps the biggest way to financially entwine yourself. And you can have a legal agreement that protects both you and your spouse in this case: pre-nuptial (aka pre-marital) or post-nuptial agreement.
Maybe you’re scared that you have all this wealth, and you bring it to a marriage with a partner who doesn’t have as much. What happens if the marriage doesn’t last? Will you lose half your wealth?
I imagine people of both sexes have this concern, but I definitely see it in my women clients. I suspect it’s rooted in large part in the long history of a culture and financial systems that have been so damn punitive to women when it comes to money. To wit: Go see how recently women have earned the right to simply have their own bank account. (Spoiler: 1974)
You could set up such an agreement so that what was Yours before the marriage remains Yours after the marriage. You could also set up rules for how that balance in ownership changes over the course of the marriage or if anything changes during the marriage, like having children.
For example, we have one client couple (in an enviously wonderful marriage, it appears) who each had significant wealth before marriage (thank you, IPOs). In the joint household household, partner #1 had, say, 70% of the total wealth and partner #2 had 30%. They wrote their pre-marital agreement so that if the marriage ended within the first year, partner #1 would walk away with their 70% and partner #2 with their 30%. The agreement also dictated that after each additional year of marriage, that balance shifted closer towards 50-50 until finally, after a certain number of years, the wealth was considered 50-50. Pre-marital agreements can say pretty much whatever you want them to say.
Getting a pre-marital agreement accomplishes two things. There’s the direct and obvious benefit of getting the legal protection for your and your partner’s money and other assets. There’s the more indirect—but perhaps more important!—benefit of forcing both you and your partner to think through all these potentially touchy (for your own psyche and for your relationship) issues of money and security. I don’t think I need belabor the importance of talking openly and honestly about money with your significant other, and arriving at a philosophy of money for your relationship that you can both agree to.
Again, consult with a family law attorney (one for each of you!) to understand the ins and outs of how a pre-marital (or post-nuptial) agreement could work for you specifically.
Marriage is, of course, not the only way to financially entwine yourself. You could buy a home (or other expensive asset) together, have kids together, etc. I highly suggest working with an attorney to draft a legal agreement to protect each of you and your partner when it comes to ownership and responsibilities around any assets and children, especially if you’re not married.
I have a colleague who illustrated the need for such an agreement, unfortunately in the negative. She did not have a legal agreement dictating rights and responsibilities between her and her romantic partner when they bought a home together. Eight years later, the home had grown a lot in value, the relationship ended (not entirely amicably), and she moved out while the partner wanted to stay in the home. Last I heard she was still trying to get what she believed was her due (her equity) out of the home, but there was no agreement as to what she was owed and how she would get it.
Living According to the Higher Level of Wealth or the Lower One?
The biggest challenge I see in couples with an imbalance of wealth (or income!) is how to make lifestyle spending decisions that work for both of you.
If You See Wealth as “Ours”
Some married couples decide “What’s mine is ours and what’s yours is ours.” Even if they have individual accounts (often simply a legacy of the time before they were married), they view money through a joint lens. The benefit here is that it simplifies all these calculations of spending and lifestyle. There is no “higher or lower” level of wealth (or income). You simply make decisions based on the household wealth (or income).
Full disclosure: this is what my husband and I did. In our case, I believe it has afforded us many more opportunities than had we tried to maintain a sense of separation. A single anecdote does not data make, I understand.
It must be said that going full steam ahead to “Ours” does open up the possibility of heartache if the relationship isn’t happy and/or doesn’t last.
[An aside: I muse that the trend in this country of getting married later and later in life makes it harder and harder to enter marriage with an “Ours” mindset. If you get married when you’re 23 (I can’t even fathom), then you both likely have very little money. You’re at the beginning of your wealth building journey! As such, it’s easier to consider everything “ours” going forward because “everything” isn’t worth much. If you get married when you’re 30 (about when I did) or even more so when you’re 40, you’ve had way more time to grow your wealth and income and be entering into the relationship with an imbalance.]
If You See Wealth as “Mine, Yours, and Ours”
If, however, you want to maintain a sense of “Mine, Yours, and Ours,” then the challenge of different wealth levels is perhaps obvious. If you have $10M in investments and your partner has $300k in investments, you buying a $2M home could be appropriate for you but not for them (considering things individually).
Don’t fret! It doesn’t mean you can’t have your fancy home. It just means you have to think about how you’ll pay for it (or any other expenses in your life) a bit more than if you and your partner were of equal wealth (or income).
Here are some possible solutions which I’ve seen clients use successfully. The first one is more common:
Sure, choose a lifestyle that the lower wealth partner couldn’t afford on their own…and then pay for it proportionate to your wealth. You have $4M to your partner’s $1M? You pay 80% of expenses and they pay 20%.
Financially speaking, the wealthier partner subsidizes the other partner. For what it’s worth, I don’t think the idea of “subsidizing” your partner is at all bad. Hell, I “subsidize” my husband 100% because he’s a stay-at-home dad.
Maybe occasionally, for special expenses (like a trip), the wealthier partner could pay all of the expense.
Live at a level appropriate for the partner with lower wealth. I, being somewhat of a recovering cheap ass, naturally gravitate to this solution. It must be said, however, that you have to figure out if it’s worth it to you to live a “smaller” life than your finances would allow you to.
Whatever solution you choose, I can aver that setting your lifestyle above what the lower-wealth partner can cover prudently with their finances and then asking them to pay half is not sustainable. It’s going to, at the very least, create financial stress for that member of the couple. And stress in one member of the couple does have a nasty tendency to become stress in the relationship.
One of You Has Wealth, and the Other Has a High Income
In this situation, I’ve seen some clients come up with creative but logical solutions.
I have one client who bought a home with her partner. She has a high income and a reasonable level of wealth. Her partner has much lower income and a lot of wealth (I don’t even know how much wealth; I just know the partner had family wealth set aside for the purchase of a home). When my client and her partner wanted to buy a home, in an expensive part of the country, she didn’t have the savings to purchase it, but her partner did. Her partner didn’t have the income to pay the ongoing expenses, but she did.
So, they bought the home outright, with cash, most of which came from the partner. They drafted a real estate agreement specifying who owned what percentage of the home initially (based on how much they each put down on the house). The real estate agreement also dictates how that percentage ownership changes each year as a result of her paying the ongoing expenses (property tax,insurance, and similar), and also if one of them covers a significant expense (ex., putting on a new roof).
They bought a home that was much more expensive than my client could have afforded on her own. But they arranged it such that her partner used his wealth to be able to purchase the home outright so that the ongoing costs were appropriate for my client’s income. This left them with a home they could both be happy about, without putting my client in a situation where she felt stressed out by her housing costs.
Having a different financial situation from the person you commit yourself to can easily and understandably create challenges. Those challenges can turn into problems if you don’t intentionally work through them.
I’ve given some examples in here of how some of our clients have faced this challenge, in the hopes of sparking some thoughts about your own situation. Whatever your solution ends up being will have to take into account the particulars of your situation: the legal and financial particulars, and your emotions and values.
In case you hadn’t noticed, any relationship that succeeds over the long term takes real work. 😬 (I’m at 16 years of marriage at this point, and there have been marriage counselors!) This is one facet of the work. But if you do the work, then you can enjoy your relationship, your life, and your partner or spouse so much more.
If you want to work with a financial planner who can help you navigate these sensitive financial and emotional issues in your relationship, reach out and schedule a free consultation or send us an email.
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