Before you start you and your partner should be on the same page around your financial attitudes and goals. Consider using the F-empowered “how to talk to your partner about money” guide hyperlink. All successful teams are built on trust and you should be cautious about combining all your finances if you have any uncertainties.
When thinking about combining your money there are a few basics that apply.
Ownership – who owns the asset or the obligation and who is entitled to the benefit of the asset or is
ultimately accountable for any consequences.
Control – who can make decisions about something and put those decisions into practice
Sometimes ownership and control can be the same, but it does not have to be. For example, if you have a savings account that is in your name, you have both ownership and control. But if you add your partner as a signatory to your account and give them assess then you retain ownership but now control is shared with your partner. Interest that that account earns will be considered your income for tax purposes even though your partner has control.
When thinking about how to set up your affairs you should keep in mind these two things and ensure that the way you have chosen to set things up reflects your intention around ownership and control. There is no one right way to set up your accounts and you do not have to combine everything to be financially fit.
Bank accounts can be set up in joint names meaning there is joint ownership of the money in the account. When it comes to how they operate they can be set up as requiring both account holders to authorise transactions or either account holder. The requirement for both to sign provides greater certainty that both parties are comfortable with instructions however can be impractical (imagine having to get your partner to sign/approve when you want to pay the electricity bill).
Often joint accounts are set up for activities that are communal, such as paying for joint expenses or saving up for a joint goal such as a holiday or house deposit. Both partners could put in an agreed amount into the account each month and both are responsible for managing it.
The alternative to setting up a joint account is to give your partner access to an account that is in your name. Ownership will remain with you however control is shared. This is sometimes preferable for tax purposes as the income will be attributed to the account holder. The risk is that the money can be withdrawn by your partner and this is the importance of trust.
Some assets such as property and shares can be acquired in joint names sharing ownership. Cars however can only be registered in a single person’s name. When joint ownership of assets makes sense when both partners have contributed towards the asset. If a loan is taken out to purchase the asset then it is logical that the ownership of the asset is the same as the loan, if there is joint ownership of a house then the mortgage should be in both names.
You should be mindful about ownership of loans to ensure that there are no unintended consequences. The benefit of applying jointly for a loan is that the financial institution will take into consideration income and assets as a couple, potentially increasing your borrowing capacity. On the flip-side, you will both be jointly responsible for the loan, not just your share of it, and it would impact both your credit ratings if the loan is not repaid on time.
This should also be remembered when one partner is guaranteeing a loan for the other. If one partner cannot service the loan the bank will not hesitate to pursue the assets of the guarantor.
You are often able to apply for a supplementary or secondary credit card that you can give to your spouse (or even your child). This may be the only way for your partner to have a credit card if they are not working. Both people will be able to spend on their credit cards up to an approved limit (limit is for the total of both cards) however it is ultimately the responsibility of the card holder to pay off the credit cards.
Note, if someone has a secondary credit card and their partner (primary) dies, the accounts, credit cards etc. will all be frozen and inaccessible until appropriate documentation shared. It may be beneficial to be the primary or joint holder of +1 account with access to money.
When it comes to expense such as utilities and rent, it is possible to have both parties named on the bill. It is helpful to create joint accountability for the expense and reflect the fact that both parties benefit from the services.