Combining spouses separate accounts into one joint account. Any downsides?

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neurosphere
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Combining spouses separate accounts into one joint account. Any downsides?

Post by neurosphere » Sat Oct 07, 2017 10:15 am

Two dear friends of mine left their advisors/brokers and transferred all accounts to Vanguard. The ended up with three taxable brokerage accounts: 1) his 2) hers 3) theirs. This was not intentional, it was just the easiest way to move all the assets. The combined account holds most of their assets.

Apart from legacy stocks that they cannot or should not sell due to capital gains, they essentially have a three fund portfolio, with each account containing US/International/Munis.

Question: Is there any good reason they shouldn't simply transfer the mutual funds in the individually owned accounts into the joint accounts?

They live in California. This would make rebalancing and tax loss harvesting much easier for them. It would probably simplify their taxes too, just a bit. There is currently no good "legal" reason I can see where keeping any assets in their individual names would be beneficial. I can't imagine there is any chance that filing separately will ever help them. This would also allow either of them to transact on their joint account.
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dbr
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Re: Combining spouses separate accounts into one joint account. Any downsides?

Post by dbr » Sat Oct 07, 2017 10:37 am

For some reason I have always held that married people should still have access to at least some amount of assets that are individually theirs, a bank account individually theirs, credit card(s) etc. Maybe that is irrational but it just seems it should be.

THY4373
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Re: Combining spouses separate accounts into one joint account. Any downsides?

Post by THY4373 » Sat Oct 07, 2017 10:42 am

I might ask the question the other way is there any pressing reason to combine the accounts? Maybe it is just me but I don't find three vs one account at a single brokerage much to worry about. One other thing to consider nobody thinks they are going to get divorced but for sure I would not commingle any pre-marital assets in a joint account.

And I also agree with DBR I think both spouses should have some assets in their name.

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Re: Combining spouses separate accounts into one joint account. Any downsides?

Post by Silk McCue » Sat Oct 07, 2017 10:59 am

It all depends on the couple. In our 30+ year marriage there is only “our money”, not “his and hers”. We have seperate brokerage accounts that hold our respective retirement funds (but still viewed as “our money”) and we have a joint account for taxable. It is crucial that both be on board with the joint investment strategy for the combined funds. Combining the funds could make their management over time much simpler.

delamer
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Re: Combining spouses separate accounts into one joint account. Any downsides?

Post by delamer » Sat Oct 07, 2017 11:38 am

My first thought on reading this was that it is a good idea not to have eveything in one account in case the account is hacked.

I probably would not have considered that a few months ago.

ResearchMed
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Re: Combining spouses separate accounts into one joint account. Any downsides?

Post by ResearchMed » Sat Oct 07, 2017 11:46 am

delamer wrote:
Sat Oct 07, 2017 11:38 am
My first thought on reading this was that it is a good idea not to have eveything in one account in case the account is hacked.

I probably would not have considered that a few months ago.
We probably won't ever have "everything" even at one vendor (e.g., Vanguard *and* Schwab or such), in case the vendor's website gets hacked (e.g., ransomware or whatever the next "latest and greatest" :annoyed iteration becomes).
I'm not just referring to a single account vs several accounts... it's *where* those accounts are kept.

There's little downside to keeping money/investments at more than one vendor, and nowadays, there certainly seems to be possible advantage in not having it "all in one place".
I'm not assuming worst case situations here, but rather that the vendor/accounts/assets would eventually become available/accessible again.
And if not (gasp), all the more reason to spread it out a bit.

Between reports here of fraudulent transfers and fraudulent guardianships... :(

RM
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delamer
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Re: Combining spouses separate accounts into one joint account. Any downsides?

Post by delamer » Sat Oct 07, 2017 12:14 pm

ResearchMed wrote:
Sat Oct 07, 2017 11:46 am
delamer wrote:
Sat Oct 07, 2017 11:38 am
My first thought on reading this was that it is a good idea not to have eveything in one account in case the account is hacked.

I probably would not have considered that a few months ago.
We probably won't ever have "everything" even at one vendor (e.g., Vanguard *and* Schwab or such), in case the vendor's website gets hacked (e.g., ransomware or whatever the next "latest and greatest" :annoyed iteration becomes).
I'm not just referring to a single account vs several accounts... it's *where* those accounts are kept.

There's little downside to keeping money/investments at more than one vendor, and nowadays, there certainly seems to be possible advantage in not having it "all in one place".
I'm not assuming worst case situations here, but rather that the vendor/accounts/assets would eventually become available/accessible again.
And if not (gasp), all the more reason to spread it out a bit.

Between reports here of fraudulent transfers and fraudulent guardianships... :(

RM
The older you get, the more downside there is to having accounts at multiple vendors -- especially if you don't keep good records. But I am sure that all Bogleheads are on top of their record keeping. :) It is easier on your survivors if you don't have your assets spread around.

There are two issues -- having multiple accounts at one vendor and having multiple vendors. Certainly one account at a vendor could be hacked, stolen, or otherwise compromised without your other accounts there being harmed? But for access purposes, it is good to have your funds at a couple different vendors in case you temporarily lose access, as you noted.

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BL
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Re: Combining spouses separate accounts into one joint account. Any downsides?

Post by BL » Sat Oct 07, 2017 12:38 pm

I have wondered if there would not be an advantage for step-up reasons upon death of one person. Survivor would inherit one account with full step-up and could sell without tax on gains. Not sure if it would be worth the effort to deliberately do it, but if it was set up, I might be tempted to leave as is for that reason.

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Re: Combining spouses separate accounts into one joint account. Any downsides?

Post by TravelGeek » Sat Oct 07, 2017 12:40 pm

ResearchMed wrote:
Sat Oct 07, 2017 11:46 am

There's little downside to keeping money/investments at more than one vendor, and nowadays, there certainly seems to be possible advantage in not having it "all in one place".
I'm not assuming worst case situations here, but rather that the vendor/accounts/assets would eventually become available/accessible again.
And if not (gasp), all the more reason to spread it out a bit.

Between reports here of fraudulent transfers and fraudulent guardianships... :(

RM
+1

Those threads (and threats) here and elsewhere aren't why we ended up with multiple accounts at multiple financial institutions, but for the moment it's yet another reason not to consolidate. I appreciate that simplification is also desirable as we get older, but I hope at least one of us still has 30 years of "clear thinking" ahead of us. :) (that said, I have a todo list item yet to complete to document our accounts better since it's currently my responsibility to manage our assets).

Mind you, I am not going crazy with spreading out our money. The bulk is at Vanguard and Fidelity. Some CDs at PenFed, Ally, iBonds at Treasury Direct; that's mostly it.

We obviously have separate retirement accounts, and I never got motivated enough to merge our taxable accounts. I do manage everything as one big portfolio, though.

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Re: Combining spouses separate accounts into one joint account. Any downsides?

Post by gasdoc » Sat Oct 07, 2017 1:34 pm

We have all of our investment accounts held jointly at Vanguard, which I manage. We have all of our (separate) IRA accounts at Vanguard, which I manage. I have my self-employment defined benefit plan assets at Vanguard, which I manage. We have one joint online checking account, and one joint local credit union account. All of the retirement accounts show up on one Vanguard web page. I like to keep a close handle on our finances, but I don't want to spend every awake moment keeping track of them, so this amount of complexity I can handle, but creating more accounts so that we can have mine, yours and ours just wouldn't make sense to us.

gasdoc

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Re: Combining spouses separate accounts into one joint account. Any downsides?

Post by DrGoogle2017 » Sat Oct 07, 2017 1:45 pm

I only have retirement fund at Vanguard for both my husband and I.

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Re: Combining spouses separate accounts into one joint account. Any downsides?

Post by sport » Sat Oct 07, 2017 2:04 pm

When we got married, we spoke to an attorney about this. He recommended separate accounts, except for a joint checking account, for the following reasons:
1. If one of us was sued for anything, the other's accounts would be not be threatened.
2. If one of us decided to make some hare-brained investment, we would only have access to our own accounts.
Of course, now we have POAs in place, so the second reason does not apply as much. Perhaps he was thinking about the possibility of divorce, even though he did not mention that out loud.

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gasdoc
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Re: Combining spouses separate accounts into one joint account. Any downsides?

Post by gasdoc » Sat Oct 07, 2017 3:27 pm

sport wrote:
Sat Oct 07, 2017 2:04 pm
When we got married, we spoke to an attorney about this. He recommended separate accounts, except for a joint checking account, for the following reasons:
1. If one of us was sued for anything, the other's accounts would be not be threatened.
2. If one of us decided to make some hare-brained investment, we would only have access to our own accounts.
Of course, now we have POAs in place, so the second reason does not apply as much. Perhaps he was thinking about the possibility of divorce, even though he did not mention that out loud.
Having one joint investment pool of money might make the couple work together to prevent one spouse from having "some hare-brained investment," especially since at least one of the couple is a Boglehead. Just sayin'.

gasdoc

runner540
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Re: Combining spouses separate accounts into one joint account. Any downsides?

Post by runner540 » Sat Oct 07, 2017 3:31 pm

The SIPC limit is $500k per account. That is one reason to limit the exposure in any one account.

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Re: Combining spouses separate accounts into one joint account. Any downsides?

Post by Gill » Sat Oct 07, 2017 4:01 pm

You lose the right to dispose of your property by will if it is all held jointly.
Gill

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Re: Combining spouses separate accounts into one joint account. Any downsides?

Post by Dale_G » Sat Oct 07, 2017 6:37 pm

I was the only breadwinner, but except for a joint checking account I have always maintained separate accounts for the wife and I. My IRA (with rolled over 401ks) is much larger than her IRA which only had spousal contributions, but her taxable account is larger than mine. The assets are almost equally divided.

All of it is and was always treated as "our" money. I maintained the separate taxable accounts for liability purposes. After 55 years of marriage I doubt either of us is going to run off, but if so, the remaining partner will still have half of the pile.

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neurosphere
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Re: Combining spouses separate accounts into one joint account. Any downsides?

Post by neurosphere » Mon Oct 09, 2017 6:17 pm

Thanks all for the comments. Assuming (for now) that divorce is not an issue, in order to simplify the comments, the summary is:

-- Separate accounts mitigate fraud somewhat (money spread across accounts make it less likely for an entire portfolio to be "stolen"). On the other hand, perhaps there are then more accounts which CAN be stolen? :)
-- Separate CUSTODIANS is even better. :D (I realize that some comments on this thread regarding fraud/theft suffer from recency bias, given the recent thread of a stolen account)
-- Wills don't easily handle joint accounts (or don't handle them at all). Sounds like trusts need to be in place regardless.
-- Joint accounts allow for either spouse to more easily monitor for bad/incorrect/fraudulent transactions, but...
-- Joint accounts allow for either spouse to be RESPONSIBLE for a bad/incorrect/fraudulent transaction.
-- The concept of step-up on death came up. There are nuances where which apply to the source of funds regardless of account (premarital or post-marital) and the treatment of step-up based on whether a community property state (this is CA I'm asking about, but pointing out that these details matter).
-- Some felt it was wise for each spouse to have assets in only their name, whether for litigation risk or ease of access should bad stuff happen.
-- The SIPC limit is $500,000. Assuming Vanguard, is this an issue? Do any BH make a new account anytime any one account approaches $500,000? I understand that for FIDC accounts, it's prudent to have accounts under $250,000. But I never thought about the SIPC concept for Vanguard brokerage accounts which hold ETFs, stocks, and mutual funds. Point is, I don't understand the risks, and perhaps I should start a new thread to learn about this.
-- And of course, the possibility of divorce creates a completely separate set of considerations.

Did I miss anything? 8-)
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ResearchMed
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Re: Combining spouses separate accounts into one joint account. Any downsides?

Post by ResearchMed » Mon Oct 09, 2017 6:29 pm

neurosphere wrote:
Mon Oct 09, 2017 6:17 pm
Thanks all for the comments. Assuming (for now) that divorce is not an issue, in order to simplify the comments, the summary is:

-- Separate accounts mitigate fraud somewhat (money spread across accounts make it less likely for an entire portfolio to be "stolen"). On the other hand, perhaps there are then more accounts which CAN be stolen? :)
-- Separate CUSTODIANS is even better. :D (I realize that some comments on this thread regarding fraud/theft suffer from recency bias, given the recent thread of a stolen account)
-- Wills don't easily handle joint accounts (or don't handle them at all). Sounds like trusts need to be in place regardless.
-- Joint accounts allow for either spouse to more easily monitor for bad/incorrect/fraudulent transactions, but...
-- Joint accounts allow for either spouse to be RESPONSIBLE for a bad/incorrect/fraudulent transaction.
-- The concept of step-up on death came up. There are nuances where which apply to the source of funds regardless of account (premarital or post-marital) and the treatment of step-up based on whether a community property state (this is CA I'm asking about, but pointing out that these details matter).
-- Some felt it was wise for each spouse to have assets in only their name, whether for litigation risk or ease of access should bad stuff happen.
-- The SIPC limit is $500,000. Assuming Vanguard, is this an issue? Do any BH make a new account anytime any one account approaches $500,000? I understand that for FIDC accounts, it's prudent to have accounts under $250,000. But I never thought about the SIPC concept for Vanguard brokerage accounts which hold ETFs, stocks, and mutual funds. Point is, I don't understand the risks, and perhaps I should start a new thread to learn about this.
-- And of course, the possibility of divorce creates a completely separate set of considerations.

Did I miss anything? 8-)
IF SIPC is like FIDC, the limit is "per account name per institution". So ResearchMed and Mr. NotResearchMed could each have $250k (watch out for those huge bank account returns in the future! :wink: ) and they could have a third joint account, all at Institution X. But ResearchMed could not have two separate accounts at Institution X, both titled the same way, in her name only.

So there'd be a need to use more than one institution, or some other account titles (e.g., trusts) for more than $750k coverage by FIDC.
For FIDC (no idea about SIPC) there are ways to have far more money at one institution, and they'll parcel it out among a bunch of cooperating institutions such that it all gets covered.

One other thing: If money is in a 403b/401k/etc., then one cannot spread it out beyond how many vendors the Employer uses. And those accounts can't be titled as owned A, B, and A&B, if the retirement account is A's.

RM
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Re: Combining spouses separate accounts into one joint account. Any downsides?

Post by 1210sda » Mon Oct 09, 2017 6:35 pm

Gill wrote:
Sat Oct 07, 2017 4:01 pm
You lose the right to dispose of your property by will if it is all held jointly.
Gill
Why is this a problem?

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beehappy
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Re: Combining spouses separate accounts into one joint account. Any downsides?

Post by beehappy » Mon Oct 09, 2017 7:35 pm

Gill wrote:
Sat Oct 07, 2017 4:01 pm
You lose the right to dispose of your property by will if it is all held jointly.
Gill
1. Not necessarily a bad thing between married couples
2. I don't think this is the case if held as tenants in common.

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