How to protect your wealth in marriage

A fool and his money are soon parted, or so the saying goes. Angelique Ruzicka finds out if you should be protecting your wealth in some way if you say ‘I do’.

If you’re wealthy and have found ‘the one’, the last thing you’re probably thinking about is how you should be protecting your finances ahead of your marriage. It’s not even very romantic to think that way, right?

But an expert is warning high-net worth individuals who have made a commitment to marry their life partners to not overlook the importance of mutual understanding, trust, open and honest communication to grow and preserve their wealth. He’s also recommends that wealthy individuals protect their wealth, should something go wrong. But this doesn’t mean you should shield your partner from knowing about your finances – quite the opposite.

Eric Enslin, CEO of FNB Private Wealth and RMB Private Bank, says “One of the attributes of successful wealth management is working together as a family towards a common goal. As a result, both partners should be intimately involved in their wealth journey in order to build a family focused wealth legacy that can be transferred to the next generation.”

Having advised many families about wealth building, Enslin highlights some common mistakes that high-net worth couples make:

  • Poor prenuptial agreement – an agreement should be reached upfront on how assets and income acquired prior to the marriage should be distributed in the event of a divorce. Failure to enter into a comprehensive prenuptial agreement can lead to a lengthy and costly legal battle.
  • Not consolidating wealth advisory – working with the same advisor who provides tailored services for the entire family has many advantages. Couples can save on advisory fees, consolidate financial commitments such as investments and bank accounts as well as benefit from wealth management advice that takes both their goals and aspirations into account. 
  • Neglecting estate planning – a fundamental mistake that high-net worth couples make is taking estate planning for granted, leaving them vulnerable in the unfortunate event that one partner passes away. This poses a serious threat to the family’s wealth if there isn’t an updated will in place that provides certainty on issues related to debt, trust structure, personal and business assets. 
  • Lack of transparency – it is often said that communication is one of the building blocks of a successful marriage; the same principle applies to wealth management. Couples should openly talk about money management issues and reach mutual understanding on investments, tax strategies, business decisions and challenges, as well as long-term wealth strategies.
  • Not sharing responsibilities – entrusting one partner to manage the entire family’s financial affairs is a mistake that can lead to long-term ramifications. Both partners should be actively involved to be in a good position to pass on knowledge to their heirs.

“Growing and preserving wealth requires both partners to actively work together to hone and develop family values in order to build a lasting legacy. Moreover, getting the right wealth management advice that takes into account the whole family’s needs is equally important,” concludes Enslin.