GUEST COLUMN: Prenup dollars and sense
Your wedding day is right around the corner. You’re practicing your reception speech. You love each other and you’re making a lifetime commitment.
You have no doubt talked frequently about your future together, but did your discussions include dollar signs?
Money is always one of the most challenging aspects of a relationship, especially if you’re about to become part of a blended family. Here are some prenup financial basics to smooth your transition to married life:
Consider a prenup – A written prenuptial agreement can protect certain assets accumulated before your marriage or for children from a previous relationship. Each party should receive independent legal advice and speak to an experienced family lawyer about what should and shouldn’t be in the agreement and make sure the agreement is signed well in advance of the wedding day.
Tell all, know all – Each of you should disclose assets, loans and other financial commitments and credit history. A partner’s undisclosed poor credit history could cause unpleasant surprises when you’re applying for a joint credit card or a loan.
Pick an asset – If one or both of you brought assets, like a house or car, into the union, decide if you should keep or sell them. Alternatively, one person may “buy” their share of a larger asset (such as a home), by giving the other spouse assets worth half the value of that property.
Merge or purge – Decide if it’s best to maintain separate bank accounts, credit cards and investments or to merge them to eliminate duplication and enhance financial benefits. Also consider this: while it may be financially advantageous to pool your investments for a more robust portfolio, keeping assets separate can avoid legal implications in the event of a separation or divorce. You may also want to keep assets separate in the event you want to leave them to children from a previous relationship.
Share your goals – Agree on shared financial goals, like buying a home or starting a family. If you have children, invest in an RESP to help save for their education.
Protect your partner – Disability insurance can provide a steady income stream for your family if you are unable to work. Life insurance can provide a lump sum to your beneficiaries. Mortgage protection can pay off that large debt.
Entering a blended family? You may need to update your beneficiary designations.
Reduce your tax bill – Take advantage of all available deductions and such income-splitting opportunities as spousal RRSPs and pension income-splitting. Use effective tax-planning and investment strategies to gain immediate and long-term retirement benefits.
A new will makes it right – Except in Quebec and Alberta, marriage usually voids all earlier wills, so update yours. Speak to a lawyer to update your wills. For more plans and strategies that will build the strongest financial foundation for your unique union, talk to your professional advisor.
Andy Erickson is the division director with Investors Group, Vernon. This article is provided for information purposes only. Please consult with a professional advisor before implementing a strategy.