When one member of a couple handles all the finances and dies, the surviving spouse is often left with a serious problem. Locating investment accounts, passwords to online accounts and other important information becomes an overwhelming issue, according to the article “Why smart people don’t recognize financial infidelity” from The Mercury. It’s a relatively new term, but not a new dilemma.
Take the case of a recently widowed or divorced person who has met a new person who appears to be the new love of their lives. The person is kind to them, supportive, and well, perfect. It’s hard to believe that such a seemingly wonderful person could have a dark side. However, whenever a new friend, hobby, or investment idea starts having a major impact on the person’s financial life, or if they have simply been careless with their financial affairs, the impact can become catastrophic.
People who are not confident in their ability to manage money or investments often hand off that responsibility willingly to their partner. If in a prior life, your spouse managed all of the household money and you did not learn how to handle the tasks that are required to run a home or manage an investment portfolio (or work with advisors), you might be a little too willing to pass that job on to a new partner.
You may fall into the traditional role of one person being responsible for the outside bills and investments and the other handling all of the household tasks.
Financial infidelity also includes things like having accounts that are not known to the other spouse or taking out credit cards without the other person’s knowledge. The same goes for one spouse suddenly putting a lifetime of savings into a single investment, or someone who knows little about markets spending a great deal of time day trading with the family’s savings. Gambling or excessive spending can also be financial infidelity.
What can you do? Here are a few tips.
Don’t give up control of finances. It’s not uncommon for people to combine finances when they are first married. However, if you’re heading into a second marriage, you may want to keep your money separate at first. Not paying attention to what’s going on with your money at any stage of life can lead to problems.
Educate yourself about money. If one of you is better at money management, that’s fine—but the one who isn’t needs to get up to speed. There are classes in personal finance at the local high school or college, so cost should not be an issue.
Speak up. If one person is made to feel like they can’t talk with their partner about money, there’s a problem. There may be accusations of trust—but trust is not granted automatically. Trust is built between a couple through experience. Financial transparency between partners is a sign of respect.
Read and understand documents before you sign anything. If you have questions, don’t sign anything until you have a full understanding. You should not be pressured into making decisions or commitments until you’re completely comfortable with all of the information. If you don’t get a satisfactory answer, don’t sign.
Part of your protection from financial infidelity is an estate plan. Speak with an estate planning attorney about creating a plan to protect your assets after you pass and while you are living. An estate plan needs to include – at a minimum – a Will, a Durable Power of Attorney, Designation of Health Care Surrogate, and may include Trusts, Living Wills, and other documents, depending upon your situation.
Reference: The Mercury (Jan. 29, 2020) “Why smart people don’t recognize financial infidelity”
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Special People, Special Trusts: SNT FAQs
Power of Attorney vs. Guardianship