Love & Money
The 3 Ways Being In Love Puts Your Assets At Risk
Itâ€™s all love in the beginning. But too often, it ends in hate, recriminationsâ€”and financial disaster. The difference between financially successful relationships and costly breakupsÂ boils down to avoidingÂ three dangerous relationship failsâ€”lack of openness, dishonesty, and unfairness.
It is critical toÂ honestly and completely disclose all current financial assets, liabilities, income sources, and obligations, as well as financial histories, prior to making joint financial commitments. By the way, marriage itself is such aÂ commitment. But even if you donâ€™t get married, doing things such as purchasing a home together could be dangerous if you arenâ€™t aware of financial secrets, such as an unresolved tax issue or a compulsive spending habit.
Black Enterprise spoke with divorce and family attorney Rosalyn C. Charles, Esq., of RC Charles & Associates in West Orange, N.J., about the three relationship fails that can put your assets at risk.
Failing to be open
â€œPeople donâ€™t realize that talking about finances, understanding how people feel about money, and finding out your individual vision for money is very important to sustaining a relationship in the long-run,â€ says Charles. She cites failing to have the “money talk”Â as the most common and avoidable of relationship fails. â€œThis is true not only in a marriageÂ but in any relationship in which people enter into financial agreementsâ€”even platonic friends who might choose to jointly acquire property or other assets. Your concept of riches and moving forward [toward financial goals] and the other personâ€™s concept may be totally out of whack. But you donâ€™t understand that because you havenâ€™t had that tough conversation.â€
Failing to be honest
â€œPeople often get into trouble because theyâ€™re not honest,â€ says Charles. â€œPeople are overcome by their emotions and often donâ€™t have those hard discussions about finances, their income, and their financial histories. Both men and women have come through my door to discuss their divorceÂ and have no idea what their spouse makes or what assets their spouse may have accumulated.
â€œA lot of times, they donâ€™t know this because they filed separate tax returns,â€ Charles explains. â€œOr even though they might have filed joint tax returns, they didnâ€™t review them; they just signed. So both men and women are in the dark. They donâ€™t know what kind of debt their spouse has gotten into, or what kind of riches their spouse might have.â€
Failing to consider aÂ prenuptial agreement
â€œEveryone often only thinks about the downside, of â€˜what Iâ€™m not going to get,â€™ when they think of prenuptial agreements,â€ says Charles. â€œBut if a prenuptial agreement is really borne out of a discussion and full disclosure of your finances, it can be a very good thing.Â Depending on what point in your life you happen to be thinking about getting married, both partners may have accumulated a fair amount of assets. The key to a prenup is honest and full disclosure. Itâ€™s not just to protectÂ but also to set the framework for how things might be resolved or dissolved at the end of a marital relationship. You canâ€™t necessarily predict what might happen during the course of a 20-year relationship, but a prenupÂ will at least lay the framework for how you will dissolve some things. It will ultimately save you a whole lot of money in divorce litigation.â€
The bottom line: If you canâ€™t avoid these relationship fails, there is no trustÂ and no reason to put your assets at risk by making joint financial commitments such as marriage. (This also makes a prenup unnecessary.) However, if both you and your relationship partner are committed to complete openness and honesty, you will beÂ fully informed to make decisions that are in your respective best interests. That could be to end yourÂ relationship, delay marriage while working to resolve financial challenges, or to move confidently forwardÂ while working together toward sharedÂ financial goals.
In the latter case, should you still discuss and at least consider the need for a prenup? Absolutely. If your relationship is built on a foundation of openness and honesty, including with your finances, you may never need it. But if having one, or even merely discussing it, would undermine trust and confidence in your relationship, the prenup is not really the problem. Without trust, there’s no real basis for commitment, whether financial or emotional.
Black Enterprise Executive Editor-At-Large Alfred Edmond Jr. is an award-winning business and financial journalist, media executive, entrepreneurship expert, Â personal growth/relationships coach, and co-founder ofÂ Grown Zone,Â a multimedia initiative focused on personalÂ growth and healthy decision-making. This blog is dedicated to his thoughts about money, entrepreneurship, leadership and mentorship. Follow him on Twitter atÂ @AlfredEdmondJr.