You Are Getting Married: Three Things to Do Now!
The engagement period is magical, probably one of the happiest times of anyone’s life. The engagement period is full of fun – parties, gifts, wedding planning, thinking about a home and life together. This is certainly how I felt when I was engaged to be married more than 17 years ago. But leaving the single life to become married is a major transition. Because I am a family law attorney, I knew during my engagement there was also business to be taken care of, such as preparing a prenuptial agreement. And, after now practicing family law for more than 21 years, I can tell you there are three things anyone getting married should do besides getting a prenuptial agreement:
- Share copies of your tax returns with each other. Be transparent about your respective financial situations. The good, bad and ugly of an individual’s tax return will come home to roost when you file your first joint tax return, as most couples do after they marry. So, you might as well mutually reveal any dirty laundry before getting married so neither of you is shocked after the “I Do’s” have been exchanged. Make it fun – do it over brunch with a mimosa.
- Share Personal Financial Statements. Many people who have a business or who own real estate have a Personal Financial Statement setting forth their assets and liabilities, which is information not found on a tax return. Share your Personal Financial Statement with your future spouse, or create and exchange documents that show the most recent asset and liability information. Trust me, just like the tax returns, all skeletons (the good ones and the bad ones) come out eventually. While this is indeed not a romantic gesture, it’s important to do it before you walk down the aisle and make a commitment of a lifetime.
- Make Appraisals of Property. If either one of you own real estate or a business, it is wise to have these assets appraised prior to the marriage. The reason is that while whatever you own prior to marriage is and remains your separate property, often events occur during a marriage which might convert a separate property asset to community property or to a “mixed asset” (partially community and partially separate). Knowing the value of these assets as of the date of marriage can be very helpful in the event of a divorce and avoids having to re-create this information when much of the data used to make a valuation no longer exists.
There is no doubt a premarital agreement, including full disclosure of each person’s financial circumstances is the best protection in the event of a future divorce. However, not everyone wants or needs a prenuptial agreement – which is fine – but, everyone should learn about the finances of their future spouse as it will likely impact the finances after marriage. Why not hope for the best and plan for the worse: hope divorce never happens and that the above three tasks help to put you on a path of living happily ever after; but plan for the worst by having the necessary information to help make a smoother divorce, should that occur.