How financial rights work within a relationship
This content is for information purposes only and should not be taken as financial advice. Every effort has been made to ensure the information is correct and up-to-date at the time of writing. For personalised and regulated advice regarding your situation, please consult an independent financial adviser here at Castlegate in Grantham, Lincolnshire or other local offices.
How should you manage money within a committed relationship or marriage? What are your financial rights if the relationship goes wrong? The subject of joint finances is a complex one. Everyone does things differently, and what works in one couple may not be suitable in another. Yet learning to manage money well, as a team, is vital to the success of a joint financial plan.
Knowing how to recognise signs of “financial abuse” (financial control) and what to do about it, moreover, can be vital to maintaining personal freedom within a healthy relationship. Below, our team at Castlegate (financial planners in Grantham, Lincolnshire) offers some reflections on this important topic. We hope you find this content helpful.
If you want to discuss your own financial plan with us, please get in touch to arrange a no-obligation financial consultation, at our expense:
01476 855 585
info@casfin.co.uk
Joint vs. separate finances
Should you both have a joint account, separate individual accounts or some mixture of the two? Here, it’s important to recognise that everyone’s money attitudes are different. Some people see both parties’ assets (and debts) as suddenly belonging to each other when they get married. Yet others continue to see the money they earn as “theirs”, requiring the other partner to also earn a living and cover their own costs. Other couples keep their own account for personal spending each month, whilst contributing to a joint account that covers the household bills.
However you choose to approach this with your partner, there are some good principles to think about following. Firstly, be careful about merging finances if one (or both) of you has poor credit history. Simply living with – or being married to – someone with a bad score will not pull your own score down. Yet applying for a mortgage or joint bank account together will result in a “co-score” that could affect your record.
Secondly, be clear with each other about your expectations about money. For instance, how do you imagine the household finances will be arranged if you have children and one of you stays at home to look after them? Thirdly, take care to avoid a situation where only one of you deals with – or understands – the finances. This helps you both to circumvent the possibility of financial abuse in the years ahead.
Recognising financial abuse
When two people in a couple treat each other with equal respect with their finances, this makes it easier to make good decisions as a team. You both know your assets, liabilities, income and expenditure, and share a vision about your financial future. However, financial abuse can take place even in a relatively “healthy” relationship. Here, perpetrators use – or misuse – money and assets to control the actions (present and future) of their spouse/partner.
Financial abuse can take many forms. For instance, perhaps the breadwinner in a household keeps most of their earnings to his/herself – leaving little for the other person to spend without their express permission. Another scenario is one person forcing or manipulating the other to add them to a bank account, take out contracts/debts on their behalf or using devious methods (e.g. emotional blackmail) to fund something you disagree with, like a gambling habit. In many cases, financial abuse can lead a person to think they cannot leave the relationship. Or, if the individual does eventually leave, the abuse can follow them into their new life – carrying debts from the other person with them, and leaving few savings to fall back on.
How financial rights work in a couple
Entering a marriage or civil partnership creates an intricate relationship between your finances. On the one hand, you can legally keep separate finances and credit histories if you choose. On the other hand, in a divorce case your assets and liabilities are typically seen as shared by the court. Those who cohabit and do not enter a marriage or civil partnership, however, are usually regarded as having their own assets in the eyes of the law.
Remember, however, that taking out a financial product together (e.g. a life insurance policy or mortgage) links your credit files. If you are worried that your credit score has been affected by your partner (e.g. taking out debt in your name), then consider checking your report for free to identify any products which you did not purchase.
Whilst joint accounts can be a great option for many couples, bear in mind that a foundation of strong trust is needed between both of you. Either you or your partner/spouse can legally take all of the money from the account and spend it, without consulting the other person. If you are concerned, then one option is to ask your bank to require signatures from both of you before money can be taken out. One benefit to also having two separate accounts is that it can help reduce tensions if you have different personalities regarding money (e.g. one of you prefers to save, whilst the other likes to spend).
To support long-term financial planning, a couple may wish to detail their financial affairs in a (regularly updated) letter which can be passed to their partner – providing peace of mind should the worst happen.
Conclusion & invitation
If you are interested in discussing your own financial plan or investment strategy with us, please get in touch to arrange a no-commitment financial consultation at our expense:
01476 855 585
info@casfin.co.uk
