Marrying your finances: Tips for newlywed physicians

With memories of their tropical Hawaiian wedding still fresh in their minds and warming their hearts, Drs. Lara and Charles Mashek of Fort Smith, Ark., wasted little time in getting to some less-romantic newlywed business: merging their finances.

The couple, married in December 2003, sought to devise a plan to combine their debts and manage their expenses together, even though Lara Mashek, MD's debt was much higher than her husband's. Dr. Lara Mashek, a second-year resident in family medicine, is carrying about $138,000 in educational debt, and Charles Mashek, MD, who took time off to get a master's degree in public health and is looking for a residency program, is adding another $50,000.

Dr. Lara Mashek said that before the wedding, the couple discussed her much higher debt, but decided to take a unified approach. "We kind of view it as 'our' student loans," said Dr. Charles Mashek. "We plan to be together for a very long time."

There is no formula dictating the correct way for couples to merge their finances, but experts say there are several considerations that, if weighed carefully, can help newlyweds survive this transition. They say giving serious thought to issues such as joint banking, merging debt, the titling and holding of assets, tax and estate planning and keeping financial documents up to date goes a long way in helping couples combine their financial lives without a lot of strife.

And experts say the Masheks handled things well by discussing how they would marry their finances even before they officially married each other.

"This is the nitty-gritty: What are we going to do with money? It is something that should be resolved before the 'I do's.' It establishes the patterns you will follow," said Gerard J. Monaghan, president of the Assn. of Bridal Consultants, a wedding industry trade group.

Though the needs of each couple are different given their circumstances, experts say couples both young and old, and those on their first, second or subsequent marriages, can benefit from weighing these financial decisions. And for physicians, whose professional liability often makes financial precaution particularly important, the discussions may be even more important to determine how to protect assets while not shutting off access to them.

Yours, mine and ours

Many couples seek professional financial advice to smooth the transition. Monaghan said that the wedding industry is valued at more than $120 billion per year, and of that, an estimated $7 billion is spent on financial services for new couples.

Couples often start the process by combining their bank accounts, either completely or while maintaining some separate accounts. Sheryl Garrett, a certified financial planner and founder of the Kansas-based Garrett Planning Network, recommends that most couples have "yours, mine and ours accounts."

"A lot of us are waiting longer to get married, and we've become more independent financially. So we'd like to have our own account. But we know it's easier to have one joint household account," she said.

By having both an individual account and a household account, which is either funded equally or on a pro rata basis determined by each spouse's income, the bills can get paid in an equitable way and the individuals can maintain some autonomy for spending on personal items.

Certified financial planner Robert Reby said having an individual account can go a long way in helping some spouses deal with the pressures of the new financial situation brought on by marriage.

"I find it's important for a spouse who is not the primary earner to have a separate nest egg," said Reby, president of the wealth management firm Robert J. Reby & Co. in Danbury, Conn. "They are not in control of the money that is coming in. Psychologically they feel more secure having their own little nest egg because they don't really have the resources to fill it up again."

Of course some couples will only have one income stream, meaning separate accounts wouldn't likely be feasible. And some couples, especially those on a second or third marriage, choose to keep their bank accounts entirely separate and pay their expenses individually and lead more financially independent lives. Experts stress the importance of good communication about what each spouse wants and expects.

From the start of their new marriage in June, Christina Gillespie, MD, and her journalist husband decided to combine their finances as much as possible.

"We went joint on everything. We're a team," said the family physician who works in Washington, D.C. "We've been together for a long time and dealing with money together for a long time, so there were no surprises."

Even so, Dr. Gillespie said that going into the marriage she "reiterated" to her future husband that she was carrying about $50,000 in debt from medical school. And though it wasn't a point of contention in their relationship, she can understand how it may be difficult to take on a physician spouse who owes a lot from medical school or from starting a new practice.

"In general, I would think physicians bring a lot of extra weight into a marriage," she said.

Indeed, combining debts can be a tricky issue for newlyweds, and a particularly relevant topic for physicians who leave medical school with more than $100,000 in loans needing repayment.

"The biggest surprise comes to nonphysician spouses," said Wayne Sotile, PhD, co-editor in chief of The Resilient Physician Newsletter, a publication about physician work and life issues. (A book version was published by AMA Press in 2000.) "There's an inherent inequity in most young marriages for physicians in terms of who brings in the most debt.

"The issue becomes how much of our here-and-now lifestyle are we going to sacrifice in order to pay your educational debt? It's something that's got to be put on the table."

While most educational loans can't be consolidated with other loans belonging to someone else, individuals may be able to consolidate noneducational loans.

One of the first things the Masheks did was consolidate all of their noneducational debt to reduce their monthly payments and take advantage of lower interest rates. They also opened a joint bank account for handling bills while keeping individual accounts to use for personal "fun money."

"We just were very open about it from the start," said Dr. Charles Mashek, an AMA delegate from the governing council of the Resident and Fellow Section. "We sat down with how much debt we were projected to have, the commitments we had, the lifestyle we wanted to lead and how we would practice. And we tried to do it smart."

Thinking about liability

For physician couples, it may be especially important to give careful thought to how their assets are held and titled in light of the threat of liability lawsuits. However, to achieve true asset protection, a couple may need to set up legal structures such as a family limited partnership or trust to hold the asset, and that may take money and time to create.

"It's not as simple as putting the house in the wife's name, because creditors are typically able to follow the asset from the physician," said Don M. Roman Sr., a senior financial planner for MetLife in Atlanta.

Instead, most younger couples title assets such as their homes jointly and save the more complex asset protection measures for later in their marriage after they have accumulated more wealth, said Garrett.

Reby said there is good reason for titling assets in joint names. "It allows for free access in the case of illness or death of one of the spouses," he said. Also, it may help even the distribution of property in the case of a divorce.

Assets are commonly held jointly with rights of survivorship. Reby said another form of joint holdings, tenancy in common, is not used as often. With that type of ownership, owners can direct where their portion of the assets goes upon their death. This type of holding may be useful for people who want to ensure that their assets get passed to children from a previous marriage.

Couples may also use prenuptial or postmarital legal agreements to designate who will ultimately have rights to which assets. Ginita Wall, a certified financial planner and accountant in San Diego, said these agreements are being used more frequently than in the past. Both agreements aim to ensure that what happens financially in a divorce or death is what both spouses want, said Wall, who is director of the nonprofit Women's Institute for Financial Education.

New couples may face the prospect of paying taxes together, and though many taxpayers got some legislative relief from the so-called marriage penalty a couple years ago, higher earners may still feel the pinch. Garrett said two-income couples with an annual household income of more than about $120,000 still pay more in taxes than two single people with the same combined income.

Several individual financial documents may need to be updated after marriage. Individuals who want their spouses to reap the rewards of their financial accounts in the event of their death may have to put new names on their life insurance policies, retirement plans, IRAs, bank accounts, liquid investments and, of course, wills.

Most of these updates can be done through a person's employer or financial adviser, but a lawyer may be needed to revise a will.

In fact, several experts said that while newlyweds are updating these documents, they have a good opportunity to look at their overall finances together and start doing some planning on a larger scale, such as estate planning or harmonizing their investment portfolios.

"It's a great opportunity, a new beginning. The more clarity that a couple coming together could have on their goals, the more fun it's going to be and the higher likelihood they're going to achieve it," said Reby.