The Third P.E.C.K. in pre-marital financial prep is contractual

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Money conversations are the topic of this four- part series: P.E.C.K.   I am not talking about the “how-much-is-the-wedding-going-to-cost” type of discussions.  Instead, at the risk of sounding like a broken record, I am again highly suggesting that you discuss money matters before you get married.  Money does not get any easier to deal with once you’ve tied the knot.  It is simply good common sense to know your intended’s money language, money comprehension and money fitness prior to joining forces.

Our first installment of the P.E.C.K. pre-wedding money conversation spoke of the “P’s” – Practical, the second speaks of the “E’s” – Emotional, and this third installment discusses the “C’s” – Contractual.    It is hard to hear the word contract and not think of …

1)      Pre-nuptial agreement

In general, most young couples will not even need to think about a pre-nuptial agreement.   However, when there is large net worth(s) riding on the line, it is useful to consult a lawyer for a multitude of reasons.  In addition, if you are arriving at a second marriage with children to consider, it is a good idea to discuss your estate and your legacy for your children.

2)      What about insurance?

There are so many types of insurance – car, health, home, life – and, to some people, insurance may seem too expensive or even unimportant but it quickly becomes VERY important when you run into trouble.  I cannot stress how tragic it is to see a family devastated by the loss of a spouse/parent only to realize that they cannot maintain their home because there was no life insurance.  It is imperative that you know where your spouse stands on the topic of insurance of all kinds.

3)      Do I need a will?

Always, yes.  It is difficult to even think of, but so important and not particularly expensive, especially when you consider the cost and length of probate.   Make a will for everyone’s sake.

4)      Do we combine our debt?

I do not suggest it.  I will say it again, it is not a good idea.  However, you do need to make a plan to pay it off ASAP (see blog on minimum payments).  Also, in a martial property state like Wisconsin, it is critically important to remember that if one spouse dies the surviving spouse may be responsible for any debts left in the estate.

5)      What is a trust and why would I need one?

This is a question for your financial advisor or wealth manager and lawyer.  It is a very astute financial move when you find yourself with a burgeoning estate and overwhelming estate taxes, or if you own a farm or business.  If your estate is over $500,000 (outside of IRA money), you want to speak with someone about how a trust would benefit your financial health.  An IRA does not go into a trust, but can name a trust as a beneficiary. If you have any questions about trusts, which are extremely complicated, please see your financial advisor.

6)      How do we find someone to help us grow our wealth to the point where we need a trust?

Find yourself an advisor!  If your parents have an advisor or money manager, it is well worth your time to schedule an initial meeting to see if you like working with them and if they listen to your hopes and dreams for your future.  In addition, do you best to find someone who must hold to a fiduciary standard.  That way everyone will be working toward the same end.

7)      Finally, I believe it is very important to discuss how you might pay for continuing education.

Will either of you need a degree or an advanced degree in order to make the most of your earning capacity?  Are you in a career where there is high burn out and the probability of wanting to segue into a new field?  What will you do and how will you afford more education?

There are multiple ways to view each of these 7 ‘P.E.C.K.’ contractual money factors, but no matter how you look at it, it is ridiculously important to consider all of them prior to marriage, since you will most likely encounter most of them throughout the life of your marriage.   For the best, most up to date and expert advice , keep the lines of communication open with each other and with your money manager. These conversations are critical to your financial health.