The summer months bring many opportunities to enjoy outdoor celebrations, especially when it comes to engagements and weddings. However, getting married comes with many financial implications that must be considered carefully. Planning together as a couple can help build a strong foundation for any new relationship, so we have included some key items below to consider before and after tying the knot.
Consider a Prenuptial Agreement
- A prenuptial agreement is a legal document that outlines a list of assets and liabilities brought into the marriage and details what each person’s property rights will be after marriage. Prenups can be used to help pass separate property to children from a prior marriage, clarify financial rights during a marriage, avoid arguments in the event of a divorce, and provide protection from debts. If you don’t obtain a prenup, your state laws will govern who owns property acquired during a marriage and what happens in the event of a divorce or death.
Health Insurance Review
- Marriage is one of the exceptions that allows you to make new health insurance elections without waiting for the open enrollment period. Both spouses should sit down and review employer-sponsored health insurance plans to determine whose policy offers more attractive benefits at a reasonable cost. For someone switching health insurance providers, you might contact existing doctors in advance of switching to check if they accept the new insurance.
Update Beneficiary Information
- After getting married, you will want to update beneficiary designations on any bank accounts, safety deposit box agreements, retirement plans, insurance policies, as well as employer emergency contact information. Remember that beneficiary designations take precedent over any specifications left in a will. There is also a special rule that applies to 401(k) plans and other qualified plans governed by federal law that your spouse is entitled to inherit all money in the account unless they sign a written waiver consenting to your choice of another beneficiary.
Estate Planning Changes
- Once married, couples can transfer assets to a spouse with no federal gift or estate tax consequences. However, it is important to know that a surviving spouse does not necessarily automatically inherit all assets, so it’s important to update estate planning documents, like wills and trusts, after a marriage is finalized. Once married, certain types of trusts, such as qualified terminable interest property (QTIP) trusts and marital deduction trusts, become available estate planning tools.
Tax Filing Changes
- Depending on your individual income levels, filing federal income taxes as a married couple may result in higher or lower tax liability as compared with when you each filed as an individual. Keep in mind that when you are married, you must file as married filing jointly or married filing separately. Only if you are not married may you file as single or head of household.
Impact on Alimony or Child Support Payments
- If either party is a divorcee or has children from a prior relationship, there may or may not be financial repercussions to discuss. If either individual receives alimony payments from an ex-spouse, those payments will generally end upon remarriage of the recipient. However, child support payments, whether the individual is the obligor or the recipient, generally continue upon remarriage of either party. There are only a few exceptions, as child support is typically the obligation of the child’s biological parents, not stepparents.
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Disclaimer: Information provided is for educational purposes only. HBWM does not provide tax, legal, compliance, or accounting advice. In considering this material, you should discuss your individual circumstances with professionals in those areas before making any decisions. Further, HBWM makes no warranties with regard to such information, or a result obtained by its use, and disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information.