Togetherness is not always the best idea for couples

Joint finances require careful planning, writes Dido Sandler

SOME people find money rather sexy. The headrush when you cut a major deal, or the feel of crisp handfuls of pounds 50 notes can lead to much excitement. So why is it then, that financial planning is such a turn- off when you are in love and embarking on a long-term relationship?

The reluctance is partly, one imagines, down to our po-faced British attitude to moneytalk. It is not polite to discuss what you have got. Then there is a certain amount of reticence when entering a potentially dependent relationship. Will it put him off if I ask him to put money aside to help with my pension provision while I am taking time off having his children? Do I really want her to know about the pounds 5,000 I've saved for that dream car?

But far from damaging the relationship, openness about financial affairs should not only boost confidence between partners but also help mitigate, if not avoid, disasters in the future.

Not that you should throw caution to the wind. Fiona Price of all-women independent financial advisers, Fiona Price and Partners, says that with one in three first marriages, and one in two subsequent marriages ending in divorce, couples should approach the financial planning process in an "independent but complementary" framework. So you can still feel at least some of your money is still your own but that individuals - especially those who are dependent - will not be left high and dry if something goes wrong and you go your separate ways.

Take bank accounts, for instance. Many couples choose joint accounts for bills. Some combine savings to gain a higher rate of interest with a larger sum in the account. People should weigh up this marginal extra income against the advantage of building up independent resources. For example, a divorced women can encounter stiff resistance from the bank if she tries to open a new account after a split, even with the promise of regular and hefty maintenance cheques from her estranged husband.

Note, too, that with joint accounts you become "jointly and severally liable" for debt built up by your partner. So if he or she goes off on a spending binge you could end up having to foot the bill. Should you put your partner on your credit card, you become liable for all his or her expenditure as well as your own.

Mortgages are another area in which it can be wise to work separately towards the same goals. Helen Bath of Cheltenham independent financial adviser,Womanwise, suggests both parties take out their own investments to cover the capital repayment part of a mortgage. Partners can reassign the investments to another property if there is a break-up and the shared home has to be sold. You can either build up personal equity plans (PEPs) in your own names or take out separate endowment policies. Insurer AXA Equity & Law, for example, has an arrangement where, at little extra cost, partners take out two endowments instead of one (with double the life cover). If you share a single endowment, and you are forced by a parting of ways into selling it before maturity date, you can lose a lot of money.

Ms Price also recommends separate life insurance policies instead of joint ones. Separate products mean greater flexibility if you split up, and more efficient cover if you stay together. For little extra cost, the insurance company pays out on both people if they die, not just the first to go.

The tax regime encourages couples, especially married ones, to redistribute investments between themselves, and maximise each other's income and capital gains tax allowances. (Husbands and wives can pass assets one to the other free of inheritance tax; cohabitees have to pay the tax if the donor dies within seven years of the gift and the estate is worth more than pounds 154,000.)

If one partner pays tax at the higher rate of 40 per cent and the other remains in a lower bracket or has no income, investments placed in his or her name are taxed at the lower level. Similarly, if the husband has used up all his pounds 6,000 of general PEP allowance or capital gains, why not use up his wife's spare entitlement, too?

Wedded couples are entitled to claim the married person's (tax-free) allowance which, from April, is worth a princely pounds 268.50. The sum can go to either partner or be divided equally. The husband will get it unless you specify. But the cash value is limited to pounds 268.50 no matter which tax band the recipient is in.