In these modern times there is a strong shift away from the traditional breadwinner to a more equitable contribution by both spouses towards the income in the household. In more and more cases, there is even a reversal to where the husband stays at home with the children whilst the wife pursues her career as the breadwinner.
Either way, it makes sound financial sense for both spouses to approach their financial planning jointly. Spouses should focus on building equitable portfolios wherever possible into the future. The advantages are clear when a balanced approach is applied:
Your average rate of tax is reduced
If both spouses accumulate separate portfolios over the years then it positions the household to draw income from two sources. Our income is taxed on progressive scales, so more if more of it comes from one source then the tax rate is higher than if it was drawn equally from two tax payers. The average rate of tax is reduced.
You claim double the rebates
What further reduces the average rate of tax between spouses are the rebates applied to each partner as well as the exemptions on interest and inclusion rates on capital gains tax. So having two interest bearing accounts instead of one allows for a higher exemption on the interest and therefore a lower rate of tax overall. Joint ownership of assets will also make way for lessor capital gains tax being applied when selling off a property or shares as two inclusion rates will be applied instead of one.
You provide access to funds should you lose your spouse
Having your own equitable portfolios is very practical plan in the event of a death or a divorce. Investments tied up in the estate are locked up whilst the executor winds things up. This could take a long while leaving you financially stranded in the process. Having your own portfolio provides you with some financial freedom in the meantime.
If you get divorced you already have equitable investments in place between you which avoids having to sell off things creating unnecessary tax and costs.
The approach is one of interdependence making equitable provisions for each spouse and, if applied effectively, has the out come of “one and one makes three”.