Happy Valentine’s Day! Did you find a love match? Have you decided to move forward with your current relationship? If so, congratulations! Merging households and lives is one thing, but merging finances can be a bit trickier. If you have decided to marry, tie the knot, or jump the broom, read on to learn about some of the pros and cons of saying, “I do.”
Here are just a few of the pros, or ways that tying the knot can help improve your financial standing.
Greater sense of security – spouses can rely on each other. You’re also combining incomes (if both spouses work), and likely reducing other costs such as two rent or mortgage payments, and maybe even two car payments. You are now an economic unit; one team!
Legal protections – famously, spousal communication is privileged. But spousal protections go much further and extend to dividing business income, or even earned income in community property states, and claiming Social Security benefits, hospital visitation rights, and even rights to property upon death.
Unlimited marital deduction – Spouses can pass unlimited assets to each other at any time, tax free!
Social Security – your benefit may be higher. For example, if you are lower-earning worker and your spouse is a high-income earner, the lower-earning spouse may be eligible for a larger benefit.
Piggyback on benefits – health insurance, auto insurance, etc., cover your spouse and may open opportunities for policy premium discounts.
Less tax burden – ‘marriage bonus’ (if one spouse is low, or non-earning spouse).
Greater wealth building opportunity – spouses generally share the same financial goals and can work together to build wealth using tax, income, real estate, and various other strategies.
Spousal IRA for non-working spouse – this is a great benefit for a stay-at-home spouse to be able to plan for retirement.
Now, let’s look at some of the potential cons that could be detrimental to your financial standing for tying the knot.
Cost of wedding – be careful not to splurge and wrack-up high debt. Weddings are notoriously overpriced and wedding venues charge egregious fees on many wedding package components.
Debt and wealth – acquired during marriage is co-owned in community property states.
Liability – you are each liable for judgements and liens acquired during marriage.
Benefit loss – if you are widowed, and your former spouse was a high-earner, remarrying may jeopardize your survivor’s benefit.
Loss of aid – if relying on aid (i.e., Medi-Cal/Medicaid) your new joint income may push you above thresholds that allow you to qualify.
Higher tax burden – if both spouses are high earners, you may be pushed into a higher income tax bracket.
Overall, marriage is a boon to your financial well-being and the pros outweigh the cons. You are working as an economic unit and rowing in the same direction toward goals. However, there are a few instances like those noted above that should be considered prior to marriage. If the loss of the benefit is minimal compared to what you are gaining by getting married, by all means, tie the knot.
When you do jump the broom, tie the knot, or whatever you call it, don’t forget to review titling on all financial accounts including bank, retirement, insurance, and investment accounts as necessary. Be sure to also review and update your beneficiary, pay-on-death/transfer-on-death (POD/TOD) forms for financial accounts. Critically, you need to review and revise your estate planning documents and insurance policies. After all, you wouldn’t want an untimely death after starting your new life that unintentionally leaves your estate to an ex-spouse or sibling if that wasn’t your intent. Be sure you are aware of how marriage can change your financial life and go forth happily in wedded bliss.
As an independent Certified Financial Planner™, I can help you prepare for your new financial life. No matter where you are in life, a CFP® professional can help you create a financial plan for today and tomorrow. Contact me and let’s get started! #talktometuesday #education #Hireaplanner #marriage #love #income #estateplanning #CFPPro #LetsMakeAPlan