Congratulations to you if you’re about to tie the knot! Beyond the cost of the wedding and honeymoon, there will be some other financial changes to look forward to, or not, depending on your situation. Here are some key points to keep in mind as you march down the aisle.
Taxes: If you’re married before December 31, you will likely file your taxes jointly for that year. This may mean a higher tax bill if you’re both employed, earning similar incomes in the same year. On the other hand, if only one of you is employed, the earning spouse might be taxed less, depending on where you fall on the married filing jointly tax schedule. Consider reviewing scenarios with your tax advisor.
Property ownership: If you live in a community property state, such as California and Washington, household income is half owned by each spouse. If you save to a 401(k), for example, the principal and associated earnings are equally shared between you and your spouse. Titling your property as community property with rights of survivorship will help transfer the control of assets at death and give other tax benefits.
Insurance: Your spouse can enroll in your workplace health-plan as it’s now open enrolment for newlyweds. Life insurance, and protecting your income from a disability, should be re-evaluated. If you’ve previously carried life insurance, there may be some instances where you won’t need as much coverage as the cost of probate and estate taxes are usually non-existent between spouses.
Estate plan: You will likely want to redo your will, power of attorney, health care directive, and trust. Having these documents will provide instructions for transferring assets to each spouse and then to others at death. If you’re at risk of paying an estate tax, there are additional ways to shelter your property that's only available to married couples. If you’re LGBT, these documents become critical if you travel to places that don’t recognize same-sex marriage.
At Eureka Wealth Management, I help newlyweds plan their new financial lives, such as reviewing cash flow, re-titling accounts, managing beneficiaries, reviewing insurances, and help plan your estate. Come see me for a free consultation if you're tying the knot. Visit eurekawealthmanagement.com or call (760) 537-0791.