by Roderick Givens
Q: I’m engaged to someone who I love very much, however, he recently revealed to me that he had a substantial amount of student debt that he’s fallen delinquent on. I realize that when we get married I’ll be on the hook for much of it as well. It’s not going to keep me from marrying him, but how can we be smart about coming up with a plan to make sure he pays it off on time? That’s not an easy conversation.
A: Congrats on your upcoming nuptials. The reality is that many couples struggle with conversations around money and “money talks” are a top contributor to couple disagreement, especially in early years.
Marriage involves combining cash flows and a joint net worth in some capacity weather we talk about it or not. Addressing student debt, which is balance sheet item, and how to meet obligations, which is a cash flow or budgeting item, requires a joint understanding.
Many couples do not have a clear picture on the relationship between these documents and it leads to uncertainty going forward including plans around retirement and goals. As a financial planner, our job is to ask questions to understand the reasoning behind client actions. The primary question is: why are the student debt payments delinquent?
There may be legitimate reasons why payments are not made on time and its easy to come to conclusions without understanding the underlying rationale.
Some questions you may want to ask are: Does the debt have a high interest rate? Is he aware of alternatives for payment plans. What expenses are taking precedence over student debt? What are the assumed ramifications of late payments of the student debt?
Addressing these issues is always challenging, therefore involving a third party can be helpful in couples combining their individual perspectives into a shared objective. A financial planner can be a knowledgeable and balanced sounding board for questions and concerns around finances.
Many couples also use a marriage counselor or religious official, such as a pastor/priest, to start this conversation. However, a financial planner can provide the details on what is needed to address specific challenges without having one spouse carry a heavier burden. All expenses are not of the same importance and certainly may have different levels of priority to each spouse.
As far as you being on the hook for your fiancee’s debt: it is a legal question best addressed by an estate attorney regarding the specifics of your situation. Since, Washington State is a community property state, the laws regarding titling of debt before marriage may not split it completely down the middle. Even if marriage does not mean you will assume all his debt, it could become an issue when applying for credit jointly for assets like a car or house. Again, I would advise to seek a professional when it comes to issues like yours to confirm what you know and uncover what you don’t, but probably should about marriage and titling of liabilities.
Finally, financial conversations rarely fix themselves in marriage if they are not addressed beforehand.
Roderick Givens, CIMA ®, CFP ® is a Rainier Beach resident and Managing Member and Founder of RainierView Advisors LLC. A Seattle-based Financial Planning Firm specializing in Investment Consulting.
RainierView Advisors LLC, an independent financial planning firm has teamed up with Bender Law, an estate planning law firm to offer a 60-minute Marriage and Money workshop for engaged couples to have better conversation regarding money before marriage. This is a comprehensive look at important aspects of financial planning from a Certified Financial Planner TM and an Estate Attorney, both specializing in components of joint finances . Couples are joining with established careers, property, retirements and in some cases their own businesses. Their financial pictures have a lot of moving parts. Guidance is ideal to bridging that gap.
RainierView Advisors, LLC is a registered investment adviser in the State of Washington. The adviser may not transact business in states where it is not appropriately registered, excluded or exempted from registration. Individualized responses to persons that involve either the effecting of transaction in securities, or the rendering of personalized investment advice for compensation, will not be made without registration or exemption.
Featured photo is a cc licensed image via Sean Davis/Flickr