Image: Jon Gosselin, Kate Gosselin
Mark Arbeit  /  AP file
Jon and Kate Gosselin might have found separate accounts were easier for them in the (messy) end.
updated 10/14/2009 4:42:15 PM ET 2009-10-14T20:42:15

If you need a legitimate reason to pay attention to the tabloid tribulations of reality show couple Jon and Kate Gosselin, follow the money.

A court on Tuesday ordered Jon Gosselin to return $180,000, out of a total $230,000 his estranged wife accused him of looting from their joint bank account.

While the numbers for TV stars may have more zeros, this part of their bitter divorce fight reflects a big concern for couples from all walks of life: Is it better to mingle money or to keep finances separated?

This very practical issue can spark an emotional discussion. For some couples, joining finances is as much a symbol of their commitment as combining households. For others, keeping separate accounts is a way to avoid conflict and maintain a measure of independence.

Financial professionals say there's no system that's right for everyone.

"The important thing is that both people need to be involved in the finances at some level," said Jean Keener, principal of Keener Financial Planning in Keller, Texas. In many relationships one person will take control of the money while the other remains unaware of details about things like bank accounts, investments and even household expenses. That is fraught with potential problems, particularly if something happens to the person in command.

Reasons for concern
Beyond the obvious issue of trusting that a spouse won't drain a joint account, there are several other factors that can complicate deciding how to handle personal finances.

A key issue is each person's attitude toward money. If one is a "spender" and the other a "saver," trying to completely combine finances may create problems. Similarly, if one person is meticulous about recording transactions and the other is not, disagreements or costly mistakes may result.

For some couples, the amount they have to contribute to the relationship can create tension. If one person has more money saved or earns a higher salary, for instance, the couple needs to discuss how much each will contribute. Likewise, there needs to be a discussion about any expectations of helping to pay off each others debts.

Personal histories also come into play. A prior marriage or children will likely inform how someone wants to handle money entering into a new relationship. If there are children involved, a parent may want to keep a certain amount of money separate and consider a more detailed estate plan.

Liability issues likewise need to be addressed. If one partner is in a profession with a high risk of lawsuits, like health care, or owns a business that could get sued, having only joint assets could endanger the couple's financial stability in a worst-case scenario. Even matters like whether there is adequate insurance on each person's car could put joint assets at risk, if the underinsured has an accident.

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On the other hand, holding at least one joint account enables both people to access money that could be frozen in an individual account if the person dies. Since an estate can be held up for months, it's important to make sure at least some funds are available a surviving spouse.

Couples who decide to share an account must make sure they also share information about when they tap it, or risk problems like overdrafts. An agreement on how much may be spent without consulting the other partner may be one way to avoid disagreements.

It all comes down to honesty and communication. "That is at the heart of whatever system you have," said Kevin Sale, principal of Sailor Financial in Bloomington, Minn. "If you don't have honesty and communication, no system is going to work very well."

Ways to make it work
For people who bring substantial assets — or debts — into the relationship, the first step may be a prenuptial agreement. It's never romantic to discuss such a document, which spells out the financial consequences of a possible divorce. But having one will help to map things out clearly, especially for couples marrying later in life or those with children from prior relationships, said Brett Ellen, founder and president of American Financial Network in Calabasas, Calif.

Couples must also decide how they'll handle future earnings and household expenses. In general, they may choose to combine all of their finances, keep everything separate or use a hybrid approach that some dub, "Yours, Mine and Ours."

If they choose not to combine everything, deciding how to handle money coming into the household may be a challenge. For couples who have disparate incomes, it may be impossible to contribute equal amounts to household expenses. One solution is for both to contribute the same percentage of their income toward common expenses, rather than the same dollar amount.

Couples unsure which system will work best for them may want to make decisions gradually, suggested Carlo Panaccione, co-founder of Navigation Group Inc., a financial planning firm in Redwood Shores, Calif. In the first year of living together, couples will identify their most problematic areas, he noted. Delaying decisions about which assets to combine or the best way to handle household expenses until those issues are clear can help in the long run.

One way to avoid arguments about spending is for each person to have a pot of money that can be spent at will, without prior discussion. Having what Lea Ann Knight of Garrison/Knight Financial Planning in Bedford, Mass., calls a "slush fund" can help a "saver" avoid stress about what a "spender" is doing.

"It removes the bickering, and perhaps it even re-establishes trust," said Knight. "I'm going to give you some rope, and then trust that you will use that rope wisely."

If your're not married
For unmarried couples finances can be a bit more complicated. Joint accounts can still be opened, but should you break up, the laws that govern how assets are split between married people won't apply.

It might makes sense to have a legal agreement similar to a prenup that spells out details about each person's assets and responsibilities, particularly if you decide to mingle finances in joint accounts.

As with married couples, the key is making sure you both understand how it's supposed to work, and keep each other informed.

"I have seen it work really well for couples keeping (money) separately and I have seen it work really well for couples who have everything in one joint account," said Keener. "If there's not communication, it's probably not going to work no matter how you have your money."

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