Justin da Rosa
“I take you to be my lawful wedded partner, to have and to hold from this day forward, for better, for worse, for richer, for poorer, in sickness and in health, until death do us part.”
So the common vows go. You’ve heard them – or something similar – before in countless movies and at weddings you’ve attended. But have you given much thought to what they mean? Particularly the “for richer or poorer” part? What should a couple, about to walk down the aisle and exchange vows, do when it comes to managing debt? Let’s dig into this sensitive topic.
Managing finances as a couple
Chances are, you’ve been in charge of your own finances for a while before getting married. That means you’ve had to deal with paying bills, saving money, and managing debt. It can be complicated, depending on your financial acumen, but practice (and good habits) really do make it easier.
Once you’ve found the person you’d like to marry, you might start thinking about how to manage finances together. What that looks like is different for each couple -- there’s no playbook for managing finances as a couple. Perhaps you choose to keep all your accounts (savings, credit, chequing, investing) separate and continue to manage finances individually. Maybe one partner takes on all the bill obligations and management while the other handles saving and investing; or you choose to split certain bills and savings goals.
Whatever your agreement looks like, it’s best to have an initial conversation about who will do what and regular followup conversations to ensure you both remain on the same page.
Things become particularly tricky when one partner’s finances aren’t as established as another. Maybe your future husband or wife has more assets than you do, such as a house. Maybe you’ve been scraping together a nice little nest egg of savings. Or maybe you or your partner are bringing a sizable amount of debt into the relationship.
Finances can be tricky and emotional, so it’s good to have open, two-way communication. That’s the first -- and perhaps most important -- step to managing expectations around finances.
Managing debt as a couple
One particularly complicated scenario is when one partner brings with them a sizable amount of debt into a relationship. Whether it’s student debt, credit card debt, a maxed-out line of credit, or overdue taxes, it can be quite burdensome, depending on the amount.
The good news is that any debt brought into a marriage by one party remains the obligation of that individual. So, marrying someone with a mound of debt doesn’t automatically make you also responsible for its repayment (that is, unless you’re co-signed on debt with your partner -- in that case you would also be responsible, even if that debt was taken out prior to marriage).
If your partner fails to properly manage their debt, and collection agencies come after them for reparations, you won’t be on the hook for paying it back and your credit won’t be affected. This is the case whether you’re still together or are divorced.
If your partner declares bankruptcy during marriage, your credit will similarly remain unaffected. That’s assuming the debt is in your spouse’s name exclusively.
Once married, the rules remain fairly similar. If debt is taken out during the marriage by one party, and only in their name, that person remains solely responsible for its repayment. However, if debt is signed for by both parties, both will be on the hook to pay it back, according to David Sklar who specializes in debt solutions.
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Should you pay off your fiancé’s debt?
Now that you have a better sense of how debt works prior-to and after marriage, you might be wondering whether or not it’s a good idea to pay off your fiancé’s debt. It makes sense to want to set your new relationship up for financial success. But there are some things to consider.
Obviously, any partner would like to relieve their other half’s stress – and that includes financial. And there are some advantages to paying off your fiancé’s debt.
The first, and most obvious, is that paying off debt – particularly if it’s high-interest consumer debt, such as credit card debt – will ease not only your partner’s financial burden, but your financial burden as a couple as well. This will also likely lead to the improvement of your partner’s credit score, which will help you both down the line if you plan on purchasing property together, starting a business, or taking on any other kind of future debt.
If you do choose to pay your fiancé’s debt, it’s a good idea to establish parameters. Is the money given as a loan or a gift? If it’s a loan, what does the repayment plan look like? Do you expect to be paid back if the marriage ends? While these may be uncomfortable questions, it’s best to address them now than in the future. A lawyer can help you navigate this tricky situation, and the fee of hiring one may end up paying dividends down the line.
Of course, you can choose not to pay off your partner’s debt. You may not be able to afford to, you may want that money for something else (which is perfectly fine), or you may believe your fiancé should get themselves out of the debt situation they got themselves into.
There’s also the (however unlikely) possibility that your fiancé will take your money and run. Again, not likely, but worth considering.
The bottom line
Managing finances, prior-to and after marriage, can be a delicate situation. Money is a sensitive subject, but it’s important to ensure both you and your fiancé are on the same page, particularly if there’s a financial imbalance.
Don’t be afraid to speak to a lawyer. There are things like a prenuptial agreement or a cohabitation agreement you can both enter into to ensure the proper handling of financial situations. These are legally binding contracts that establish what will happen in the unfortunate event that the relationship ends. They’re especially helpful in situations where there’s a financial imbalance, where one partner might have more money (or more debt) than the other.
Getting married should be one of the happiest times in your life, and worrying about debt can put a damper on that. Make sure you and your partner have open communication and that you both agree about how your finances and your debt should be handled before and after you tie the knot.