Keep Some Accounts Separate: Tax and Legal Reasons to Not Fully Merge After Marriage

General
1

There’s been great discussion about merging finances after marriage, but I want to present the counterpoint: sometimes keeping accounts separate is the smarter choice.

As a CPA who works with many married couples, here are the legitimate reasons to maintain some financial separation even after saying “I do.”

1. Credit Score Protection

The Reality: Credit scores remain INDIVIDUAL even after marriage. His bad credit won’t hurt yours… unless you co-sign on debt.

The Strategy:

  • Keep at least one credit card in each person’s name only
  • If one spouse has damaged credit, avoid adding them to your accounts
  • Build/rebuild credit independently

Beancount Approach:

; Clearly separate individual credit accounts
Liabilities:CreditCard:Alice:Discover   ; My credit, my score
Liabilities:CreditCard:Bob:CapitalOne   ; His credit, his score
Liabilities:CreditCard:Joint:Chase      ; Shared card

2. Business and Self-Employment

If one spouse has business income, mixing business and personal finances is a liability nightmare.

The Strategy:

  • Maintain completely separate business accounts
  • Never pay personal expenses from business accounts (and vice versa)
  • Especially important for LLCs and sole proprietorships

Beancount Approach:

; Bob's consulting business stays separate
Assets:Business:Bob:Checking
Income:Business:Bob:Consulting
Expenses:Business:Bob:Software

; Personal/household is entirely separate
Assets:Joint:Checking

This separation protects the non-business spouse from potential business liabilities.

3. Premarital Assets and Inheritance

Legal Background: In most states, premarital assets and inheritances are “separate property” - but only if you keep them separate.

The Risk: If you commingle inherited money with joint accounts, it can become marital property in a divorce.

Beancount Approach:

; Inheritance kept strictly separate
2020-03-15 open Assets:Personal:Alice:Inheritance
  source: "Grandmother estate 2020"
  character: "separate property"

; Never mix with joint funds
2020-03-20 * "Inheritance deposit"
  Assets:Personal:Alice:Inheritance    50,000.00 USD
  Income:Inheritance:Alice            -50,000.00 USD

Document the paper trail. Your Beancount ledger can serve as evidence that you maintained separation.

4. Liability Protection (High-Risk Professions)

Doctors, lawyers, contractors, and others in high-liability professions sometimes keep assets in the non-at-risk spouse’s name.

Example: A surgeon might keep the house titled in their spouse’s name alone, with a separate account for the mortgage payments.

; House in spouse's name for liability protection
2022-01-01 open Assets:RealEstate:MainHome
  owner: "Sarah (sole)"
  reason: "liability protection"

5. Differing Financial Philosophies

Not everyone marries someone with identical money habits. Separate “fun money” accounts can save marriages.

The Strategy:

  • Each person gets an allowance into their personal account
  • No questions asked about personal spending
  • Reduces conflict over discretionary purchases
; Monthly "fun money" transfers
2026-01-01 * "Alice's monthly allowance"
  Assets:Personal:Alice:FunMoney    400.00 USD
  Assets:Joint:Checking            -400.00 USD

2026-01-01 * "Bob's monthly allowance"
  Assets:Personal:Bob:FunMoney      400.00 USD
  Assets:Joint:Checking            -400.00 USD

6. Tax Planning Flexibility

Married Filing Separately is sometimes the better choice:

  • One spouse has huge medical expenses (AGI threshold is per-person)
  • Student loan repayment under income-driven plans
  • One spouse owes back taxes

Separate accounts make MFS filing easier to execute and audit.

7. Second Marriages and Blended Families

When children from previous marriages are involved, separate finances can be essential:

  • Protect assets for biological children
  • Maintain clarity on “his” vs “hers” vs “ours”
  • Simplify estate planning
; His assets go to his kids
Assets:Personal:Bob:Kids529:Child1
Assets:Personal:Bob:Kids529:Child2

; Her assets go to her kids
Assets:Personal:Alice:Kids529:Child3

; Joint assets follow joint estate plan
Assets:Joint:Investments

The Bottom Line

Full financial merger is romantic but not always wise. Consider your specific situation:

Situation Recommendation
Both W-2 employees, no prior marriages Full merge often fine
One has business income Keep business separate
Significant premarital assets Keep them separate
High-liability profession Consult attorney, consider separation
Second marriage with kids Partial merge, protect each side

Your Beancount should reflect your actual legal and financial structure, not an idealized vision of “our money.”

Questions? Happy to discuss specific scenarios.

2

This is such an important counterpoint. We fell into the “merge everything” trap early on and had to backtrack.

Our Inheritance Story

My wife inherited about $30k from her grandmother early in our marriage. We were so “we’re a team!” about it that we deposited it into our joint savings.

Two years later, her financial-planner uncle pointed out what @accountant_alice explained: that money was now legally marital property. If we ever divorced, I’d have a claim to half of HER grandmother’s money.

Not that we’re planning to divorce, but… it felt wrong. That was HER family’s money.

The Fix

We “unwound” it by:

  1. Moving the inheritance amount to a new account in her name only
  2. Documenting the transfer in Beancount with clear metadata
  3. Keeping all the original inheritance documentation
2024-06-01 * "Return inheritance to separate account" #inheritance-fix
  Assets:Personal:Sarah:Inheritance    30,000.00 USD
  Assets:Joint:Savings                -30,000.00 USD
  ; Note: Restoring separate property status
  ; Original inheritance: 2022-03-15 from Grandmother Smith estate

A lawyer told us this probably re-establishes separate property status, but it would have been cleaner to never commingle in the first place.

The “Fun Money” Accounts Are Marriage Savers

Alice’s point #5 is so real. We used to argue about:

  • My golf expenses (she thought it was too much)
  • Her spa visits (I thought it was too much)
  • My tech gadgets (ditto)
  • Her book collection (okay, that one I actually agreed with)

Now we each get $500/month into personal accounts. Zero questions asked. Peace restored.

; We call these "No Questions Asked" funds
Assets:Personal:Mike:NQA
Assets:Personal:Sarah:NQA
3

Great points all around. From a FIRE perspective, there’s another reason to maintain some separation: investment tracking clarity.

The Problem with Fully Merged Investment Accounts

When tracking toward FIRE, I want to know:

  1. What’s MY invested amount vs her invested amount
  2. What would MY 4% withdrawal be if we divorced
  3. What are the tax implications of different accounts

If you merge everything, these questions become harder to answer.

My Approach: Separate Investment Tracking

; FIRE tracking by person
Assets:Personal:Fred:Brokerage:Taxable    ; My taxable investments
Assets:Personal:Fred:Retirement:401k      ; My 401k
Assets:Personal:Fred:Retirement:IRA       ; My Roth IRA

Assets:Personal:Sarah:Brokerage:Taxable   ; Her taxable investments
Assets:Personal:Sarah:Retirement:401k     ; Her 401k
Assets:Personal:Sarah:Retirement:IRA      ; Her Roth IRA

; Joint taxable only for truly joint goals
Assets:Joint:Brokerage:HouseFund
Assets:Joint:Brokerage:TravelFund

The Query That Keeps Me Sane

I run this monthly to see individual vs combined FIRE progress:

; Fred's FIRE number
SELECT sum(position) as fred_fire
WHERE account ~ 'Personal:Fred' AND (account ~ 'Brokerage' OR account ~ 'Retirement')

; Sarah's FIRE number  
SELECT sum(position) as sarah_fire
WHERE account ~ 'Personal:Sarah' AND (account ~ 'Brokerage' OR account ~ 'Retirement')

; Combined household FIRE
SELECT sum(position) as household_fire
WHERE account ~ 'Brokerage' OR account ~ 'Retirement'

Why This Matters for FIRE Couples

My wife is 3 years younger than me. If I want to retire at 50 and she wants to retire at 55, we need to model:

  • What do I need independently for 3 years of solo FIRE
  • What do we need jointly for our shared retirement
  • Healthcare coverage gaps (different ages = different ACA subsidies)

A fully merged ledger makes this analysis harder.

Retirement Account Reality

@accountant_alice alluded to this, but it’s worth emphasizing: 401(k)s and IRAs are ALWAYS legally individual. Even if you call them “our retirement,” they’re titled to one person.

Beancount should reflect this reality.

4

From a workflow perspective, partial separation can actually SIMPLIFY your Beancount maintenance, not complicate it.

The “Financial Firewall” Approach

I maintain three completely separate file structures:

finances/
├── household/              # Joint finances
│   ├── main.beancount
│   ├── 2026-joint.beancount
│   └── accounts.beancount
├── james-personal/         # My stuff only
│   ├── main.beancount  
│   ├── 2026-personal.beancount
│   └── business.beancount   # Consulting
└── spouse-personal/        # Her stuff only (she maintains)
    └── main.beancount

Why This Works:

  1. Clear ownership - I’m responsible for household + james-personal. She’s responsible for spouse-personal.
  2. No merge conflicts - We’re never editing the same files
  3. Privacy where wanted - She doesn’t need to see my gadget purchases, I don’t need to see her beauty spending
  4. Easy backup - Each section backs up independently

Connecting Them When Needed

For combined net worth, I have a read-only “rollup” ledger:

; household-rollup.beancount (READ ONLY)
include "household/main.beancount"
include "james-personal/main.beancount"

; Her balances imported as estimates monthly
2026-01-01 balance Assets:Spouse:Estimated:Total  125,000.00 USD

This gives me a household net worth view without her having to share her actual ledger.

Time Savings Are Real

Importing and categorizing takes less time when you only handle your own “weird” transactions. I don’t have to ask her “what was the $47 at Marshall’s?” because it’s in her ledger, not mine.