Does Merging Finances Include Debt?

Time To Read 3 MIN READ



"Merging finances" is one of those generic terms that mean different things to different people. Does it mean merging debt? It can, but no law says it has to. In fact, experts recommend that you think long and hard before you take on the separate debt of your partner or spouse.

Money Issues Can Cause Stress in Relationships

If you're concerned about money and how your finances will work when you become a couple, you're not alone. Money is the single biggest sticking point between spouses. According to a survey conducted by the American Institute of Certified Public Accountants, it caused 27% of all arguments. 

Don't let yourself be pressured into any one plan. The only "rule" is to find a solution that works well for both of you. Some see a complete merging of finances — including taking on each partner's separate debt as a joint responsibility — as the ultimate expression of commitment. Others feel that separating finances shows a greater level of trust.


State Property Division Laws Impact a Married Couple's Finances

If you're married or about to be, your state's laws about marital property and divorce may merge your marital finances, including debt that either of you assumes during the marriage. 

"As you look at the options, it's important to be aware of your state's divorce laws," says Michael Clancy, a family law attorney with the Scottsdale, Arizona, firm of Hildebrand Law. State laws determine how property and assets are separated in a divorce, unless the couple agrees differently.

"In community property states like Arizona," Clancy says, "all income earned by either spouse during a marriage, and all property purchased with that income, belongs equally to both spouses in case of divorce. Debt is treated similarly, and most debts accrued during a marriage are the joint responsibility of the community."


Property or Debt Acquired Before Marriage — or by Unmarried Couples — Is Separate

Any money or property a spouse acquires before the marriage usually belongs to him or her alone. A court does not divide it between spouses if the marriage ends in divorce. Similarly, debts a spouse incurs before marriage are solely his or hers.

This is also the general rule for an unmarried couple's income, property and debt. All property acquired by an individual belongs to that person — whether earned before or during the relationship — and all debt incurred by him is his sole responsibility.


You Can Write Up Your Own Prenup or No-Nup

Just like a married couple can write up their own agreement on what property and debt belongs to the couple in a prenuptial agreement or "prenup," unmarried couples can also agree on how to merge their property and debt in a private contract, sometimes called a no-nup.

However, while a divorce court may include the terms of a prenup in a divorce agreement and enforce it as a court order, a property agreement between unmarried persons is not an order of the court. You'll have to enforce it as a private contract.