Dear Quentin,
My husband and I make about the same salary, and live modestly. Six months after we married, I found out my husband’s net worth is virtually zero. He owes more money than he has assets (approximately $40,000). My net worth is over $500,000.
I only found out about his situation because we each own homes, and we are looking to buy one together and completed a mortgage application in preparation for pre-approval. My home is paid off and I have very little debt.
While we dated for five years, he implied he was financially secure. He was always hesitant about sharing actual numbers, and now I know why. I’m an accountant and — looking at the numbers — he is not solvent, even though he still claims he is.
“‘We have not combined our finances, but we do have one joint savings account.’ ”
We have not combined our finances, but we do have one joint savings account. He keeps hinting at wanting to take care of the finances when we finally buy a house together. I’m against this after finding out about his financial situation.
He doesn’t know the value of my assets, but he does know about my debt. He will not agree to let me take care of the finances. How can I protect my accounts (inheritance from my parents, my 401(k), and my other savings accounts?
I’ve thought about a postnuptial agreement, but I’m doubtful he will agree to one.
Concerned About Finances
Dear Concerned,
Your husband not being forthcoming about his finances and wanting to control your finances are the two italicized sides of a thruppenny bit. Neither bodes well for good monetary health. You can’t do anything about the former, but you can do something about the latter.
Before we go any further, we need to address the missing pieces in your letter. They may be key to your future plans. You don’t say what age you are or how much time you have until retirement and/or how much you and your husband earn. If you are close to retirement and earn a low five-figure salary, proceed cautiously.
If you are younger and, say, earn high six-figures, you likely have time and compound interest on your side. If you buy a house, sign an agreement noting how much you each contribute, and will receive if you sell it. Ensure your plans are equitable and figure out if husband has the wherewithall to make up for lost time.
“‘If you are younger, and earn high six-figures, you have time and compound interest on your side.’”
About your five-year courtship and your now-husband’s reticence regarding his financial situation: One could argue that he lied by omission, but it’s also your responsibility to do your due diligence before signing a marriage contract. It’s a legal and financial merging of two lives.
Your husband’s desire to take the reins of your financial life gives me serious pause. Your No. 1 priority should be to keep the lion’s share of your assets separate. Anything you commingle in a joint bank account or even invest in a house that you purchase together automatically becomes marital/community property.
One-third of people keep at least one financial secret from their partner — anything from credit-card debt, a secret bank account or a big-ticket purchase. That’s according to a recent poll by TD Bank. But one secret begets other secrets. It never happens in isolation.
When people hide their finances it’s either because, like you, they have a sizable nest egg and want to protect it or, like your husband, the cupboard is bare, and they wish to conceal that fact. Your husband, however, has a plan to improve his financial security, with your help.
“‘One could argue that he lied by omission, but it’s your responsibility to do your due diligence before signing a marriage contract.’”
In the absence of a prenuptial agreement or postnuptial agreement, talk to a family law attorney about the laws in your state, if you should proceed with a house purchase, and on what grounds. What happens if you want to sell? If you break up? Do you split costs 50/50?
Inheritance, as long as it is not deposited in a joint savings account, is generally considered separate property in the event of a divorce. “Your spouse cannot claim an interest in the inheritance that you receive during your marriage,” says Brenji & Associates.
As that Beverly Hills-based family law firm says: “The statute defining separate property specifically states that all property received during the marriage by ‘gift, bequest, devise, or descent’ is considered separate property.” Again, there is an important caveat: Keep separate assets separate.
“ ‘You are under no obligation to open your books to someone who has been so cautious about opening up his finances to you.’”
You write: “He will not agree to let me take care of the finances.” I urge you to change your thinking. It’s not a question of letting him do X or Y. You are an adult. You are the one who decides whether anyone else has a say in the management of your finances. You’ve done pretty well on your own steam thus far.
There is a time for discretion, and you are currently under no obligation to open your books to someone who has been so cautious about opening up his finances to you. If your husband has not successfully managed his finances, why would you allow him to be put in charge of your own?
Seek advice from an attorney in your state, and/or financial adviser about keeping your inheritance and assets separate, and how you proceed as a married couple. None of this is particularly romantic, of course, but it all goes back to the one thing that holds all relationships together: Trust.
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