Accountability: His and Hers

Separate finances can help, especially when boomers remarry.

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When Sharon Cotter married her first husband 35 years ago, she didn't think twice about combining all of their bank accounts and letting her husband manage their investments. Then, when they divorced after 25 years of marriage, she had no idea how much money they had or where it was.

 

"I will never let that happen again," says Cotter, now 58 and about to remarry. She has two children and wants to protect their inheritance, as well as ensure she still has her own money in case something goes wrong in the new marriage. "You have to protect yourself, no matter how much you love someone," says Cotter, a career management consultant in St. Louis.

Like Cotter and her fiancé, more and more couples are ditching the traditional share-everything approach and keeping their accounts separate. Nearly half of married households have two or more checking accounts, up from 39 percent in 2001, according to Raddon Financial Group. That suggests a rise in his-her bank accounts. Financial advisers point to later marriages, higher-earning wives, and the prevalence of divorce as factors contributing to the use of separate accounts, while marriage counselors warn that split funds can lead to secrecy and distrust.

The trend appears strongest among remarrying baby boomers bringing substantial assets and financial commitments into their new marriages. "Typically they will have 'ours,' 'mine,' and 'yours' [accounts]," says Kathleen Miller, author of Fair Share Divorce for Women and president of Miller Advisors, an investment firm in Kirkland, Wash. She adds that separate accounts are useful for paying the expenses of children from previous marriages, for example. Many second marriages fail because of money issues, Miller says. That's why she recommends that remarrying clients have an open discussion about finances, plus enter into a prenuptial agreement.

Protecting yourself. Separate accounts also serve to protect women who earn less money than their husbands in case of divorce, Miller adds. She recommends that stay-at-home wives, for example, establish their own retirement accounts using a spousal ira, which allows nonworking wives and husbands to save money under their own name, using their spouse's income. While retirement savings would probably be considered jointly owned in the case of divorce, Miller says it's still important for both partners to have some savings in their own names.

Candace Bahr, cofounder of the nonprofit Women's Institute for Financial Education and owner of an investment firm whose clients are predominantly divorced women, points out that marriages don't last forever. "Even in the best marriages, one spouse is going to die. So it's still important to maintain your own identity," Bahr says. She recommends keeping assets, retirement accounts, and credit in one's own name. If one spouse is completely responsible for the finances, that leaves the other vulnerable in the case of death or divorce, she says.

Combining accounts slowly. Patty Sullivan, owner of a gift boutique in Kansas City, Mo., decided to maintain her own account when she married her second husband eight years ago. Throughout her first marriage, which ended in divorce, she and her former husband shared all of their money. This time around, Sullivan, 56, and her husband, Bob, each came into the marriage with children and significant assets. To protect their children, they kept the money they brought into the marriage in separate accounts, with their respective children as beneficiaries, and created a shared account for money they earned after their marriage.

Eight years later, they use their shared money to pay for their children's weddings and other family expenses. "We don't want to draw lines," Patty says. But they still maintain the separate accounts, which come in handy when they buy each other birthday presents. The Sullivans also plan to draw from the individual accounts to fund their retirement.

Keeping some "fun money" separate. Many advisers recommend separate bank accounts for all couples, not just those who are remarrying. "It's always best to have some separate accounts," says Sharon Epperson, author of The Big Payoff: 8 Steps Couples Can Take to Make the Most of Their Money—and Live Richly Ever After. "It just makes it a lot easier if [couples] can have an account that they go to for their own purchases where they don't have to tell somebody every time they're making a purchase."