My boyfriend and I are seriously discussing marriage. We are compatible, but we manage money differently to say the least. He's got a ton of student loan debt, and he's got at least a few thousand on credit cards that he uses for electronics, computer stuff, car stuff and the like. I actually think he has more debt than he's letting on. We live in Wisconsin, and I've been told that it has community property laws. Could you explain what, exactly, that means? I keep hearing different things. Will all his debt be my responsibility after we tie the knot? Or just new debt? I can deal with his money issues, but I don't want them to become mine. – Michelle
At least you know about your differences before walking down the aisle. All too many couples discover big balances and money management troubles long after they say, “I do.” Then it's a “what have I gotten into?” situation.
There is so much for the two of you to resolve right now, and I'm glad that you've got the time to do so. I recommend that all people who intend to pair up talk about their finances thoroughly and candidly. We'll get to the community property stuff in a minute, but, here are four topics that you and your boyfriend need to discuss right away.
- Transparency. I believe a totally open attitude about money is the right one to have with a partner. All financial subjects need to be on the table. Talk about what you both own in savings and investment accounts, as well as what each of you owes to creditors. It's not a great sign that you're concerned he's hiding debt, so solve the puzzle by pulling and sharing your credit reports. If he resists, something is wrong.
- Debt repayment. The moment you see his credit reports, you'll know the balances for his student loans, credit cards, bank loans, car loans and other credit obligations. Don't pin him to the wall, demanding answers, but clearly and politely ask what he intends to do about getting them down. If you want help with ideas, go to a credit counseling agency together.
- Bank accounts. You probably have individual checking, savings and credit accounts at this moment, but how would you like to own them after you marry? Discuss and decide. There is no firm rule that says you must merge any of them. In fact, as long as you keep each other in the loop with regular money talks, maintaining account autonomy can be practical and positive.
- Budgeting. As a single person, you can spend your income as you like — as can he. But after those rings are on, your combined household cash flow will matter quite a bit. You'll be living as a unit, and so will share the rent or mortgage, utility bills and other essentials. As a couple, you must develop a budget that you can both agree and adhere to. Make sure it's not so restrictive that breathing becomes impossible, but not so loose that you're failing to meet necessary bills.
OK, on to community property laws. Nine states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and, yes, Wisconsin) have community property laws on the books. Briefly, and in laypersons terms, this means that all assets and obligations (aka debts) that you enter into the union with will remain exclusively yours — or his. Assets and obligations either party acquires after marriage are generally divided equally after a divorce — even if the debt is only in one partner's name.
Things get dicey, however, if one partner takes on debt that is for his or her benefit alone instead of for the benefit of the couple. For example, if your husband were to take on debt for home renovations for the house you share, that debt would likely get split in divorce proceedings. If he were to accrue a pile of debt to finance a car only he drives, that may be a different story. Community property states differ when it comes to defining “joint” debt, and, heaven forbid, if it ever comes to divorce, you'd likely need an attorney to sort it all out.
In short, however, you are not, nor will you be, legally responsible for what your guy charged before the wedding.
Feel better now? I hope so! Tying the knot is serious business and ought to take place only after you understand what you're getting into and are prepared to tackle potential problems.
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