For richer or poorer? Or should we just go Dutch?

Does combining finances with your partner make sense?

Sharing lives and beds is one thing, but when it comes to bank balances many of us are not quite so open, or trusting; in fact one in 10 of us has money set aside that our partners know nothing about.

According to website a quarter of those with a secret stash kept it aside because they were worried their partner would try to spend it. Having an emergency cash reserve may seem like a good idea, but hiding it from your partner is not the recipe for a loving relationship.

Andrew Swallow, an adviser with Swallow Financial Planning in Kensington, London, believes that if you are keeping money secret from a partner you need to assess what kind of relationship you are in. He said: "A couple who are in it for the long-term will have shared goals, such as buying a home together.

"You need to be honest with yourself and your partner. If you are in a couple but you know your relationship is not going to last then keep your finances separate. But if you are with someone, and know the relationship is going somewhere, then you are best having a talk sooner rather than later."

Once you've established you are in a committed relationship then the most romantic thing you can do is pay a trip to the solicitor, particularly if you don't intend to get married.

Mr Swallow added: "If you are buying any substantial asset together such as a house, and you are not married, then the brutal truth is that you both need to make a will. If your partner dies and you are not married and you have no will, then you could find yourself in a financial mess. Your partner's family could have claim on the property and you could be forced to sell to pay inheritance tax."

The unmarried partner's inheritance tax is 40 per cent on a property worth £325,000 or more; you don't benefit from the couple's IHT allowance, which allows you to own a property worth up to £650,000. If you have substantial assets and/or you've been in a previous relationship in which you had children, a will is necessary as well as a pre-nuptial agreement setting out out who gets what if you split up. "Pre-nups are not yet recognised in law but courts will take them into account," Mr Swallow went on. "Of course they are not cheap to draw up so you need to see a specialist family solicitor."

Kate Marsden, an adviser with Very Nice Advice in Cookham, Berkshire, points out that there are other advantages to being married or in a civil partnership. Such couples can usually transfer assets to each other without paying capital gains tax, 28 per cent of any asset worth over £10,600.

"For example, Peter, who is a higher-rate taxpayer could transfer a whole bunch of dividend-paying shares to Paul, who is a basic-rate taxpayer. That will minimise the tax payable on the dividends. Those in marital difficulties should also be aware that if they separate from their spouse they can still transfer assets between themselves and their partner in that same tax year, without a capital gains tax liability."

She said: "That means if you stop living together early in the tax year, you have a good few months to transfer assets such as second home.

"Remember that wills are not null and void on divorce because your ex will be, so to speak, deleted from it, but the rest will remain valid."

What if you don't want to get married, but still want the financial benefits of being in a couple? Mr Swallow said: "If you are both self-employed and one of you earns more than the other, you can set up a company, in which you are both partners, and can combine your tax allowances. You need to get expert advice but setting up the company is relatively easy."

Combining finances on a big scale, such as buying a property or setting up a company together is all very well, but many couples find the financial nitty gritty of life such as paying bills, or rather who should pay them, as the financial flashpoint.

Kim Stephenson, a psychologist and author of Taming the Pound, says all couples are unique and need to find a financial framework that works for them. "If you are both independent you may need to have separate finances, but for the relationship to work, and to make sure the gas bill gets paid, then you need to either split things down the middle or divvy up who pays what between you and stick to it.

"It does get tricky buying presents. If you've got anything to buy without making an issue of it, you can't really do that without having some secret money you don't tell your partner about."

For most people, he says, a joint account for major bills into which they both pay most of their money, with individual accounts that allow individual "pocket-money", works the best.

Stephenson says:"You need to sit down and decide are toys for the baby, dry cleaning bills, gadgets for the car, basic clothing, joint expenses or individual ones. Are all clothes individual expenses, or only impractical ones.

"You can buy presents for one another out of 'your own' money, but what about treats for both? Is a luxury evening out a treat from one of you to the other or a joint expense, and if it is a joint expense who is responsible for making up the shortfall if you can't pay the mortgage or the joint credit card for essential shopping?"

Case study: 'We like to keep things separate'

Amanda Whyte is a businesswoman and journalist from London and married to Ian, a management consultant. She has recently set up the website Peas-and-Love and has two children, two-year-old son Sam and four-month old daughter Savvanah.

"We don't have a joint account and we keep our finances as separate as possible. We have talked about it but never got round to doing it."

Amanda believes that as long as enough money is coming in to cover the bills their system works perfectly. "Ian pays the mortgage and the bills. I work three days a week for IPC Media and the childcare comes out of my salary. I also buy most of the stuff for the kids, pay into my pension, buy my own clothes and I finance my own business.

"We aren't too badly off but we don't have savings, apart from our pensions. We both agree that any extra money should be spent on fun things. In fact, we've just bought a camper-van."

Case study: 'A joint account makes things simpler'

Leah Newland is married to Ian and they live in Cookham, Berkshire.They have two children, Edward, who is two years old, and Sienna,eight months.

"My husband and I manage our finances jointly. We decided to open a joint bank account when we got married in 2007, but it was only after our first child was born that we decided to pay everything from that account.

"We give ourselves pin money – which we can use to spend on things, for ourselves or for one another.

"He is a spendthrift, I'm more sensible, so it does help make things easier. We have set up a company from which we pay our wages. It makes things simpler, mainly because we are both self-employed."

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at

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