After the party is over and the honeymoon tan has worn off, many newlyweds ask themselves – what exactly are the financial implications of getting married?
As a couple, it’s important to understand the monetary implications of “’til death do us part.” After all – while marriage offers many financial benefits, it comes with its set of potential challenges, too.
We’ve put together a list of four important things newlyweds need to consider after saying “I do:”
Take a good look at your taxes
Depending on your income and your tax bracket, a married couple filing jointly may end up paying more in taxes than when they were both single (hence the name “marriage penalty”). The reason for this is that two people who combine their income as one suddenly find themselves in a higher tax bracket than before. This is especially true for two high earners.
Because of this, it’s a good idea to talk to a tax planner or financial advisor in your first year of marriage. It may be necessary, for example, that you adjust your withholding, so that you don’t end up having to pay back taxes. To do this, review your W-4 and determine how many withholding allowances you deserve. Once you have determined the proper number, divide them however you choose. Just remember – each allowance is worth more to the higher earner.
Review and coordinate benefits
As a married couple it is more than likely that you will be able to take advantage of some savings opportunities when it comes to benefits. Sit down together and make a list of all fringe benefits at both workplaces. Next, determine if combining benefits will result in savings. By joining your spouse’s health care plan, for example, you may be able to save money and get added benefits. Some employers even let you trade your coverage for another benefit.
Health plans typically have an annual enrollment or re-enrollment period. However, marriage typically counts as a “change in circumstance,” which would allow you to change your status throughout the year.
Be cognizant of your joint debts and credit ratings
From the time you say “I do” your credit history will be joined with your spouse’s. If you decide to purchase a home, for example, both your credit score and your partner’s score will be taken into consideration. Because of this, it’s critical that you both be honest about your credit history and existing debts.
You will need to decide as a couple if you want to co-mingle your existing debt or keep it separate. If you choose to add your spouse to your credit card, for example, he or she would be able to use the card, but would also become obliged for the debt.
It’s also very important to understand the implications of your spouse’s existing debt.
Iowa, for example, has dower rights, which means that your spouse will automatically be added to the title of your home after marriage. While this typically makes newlywed’s lives easier, consider this scenario:
Your spouse is carrying serious debt and has become delinquent on his payments. Collections have started. When you marry, his name will be added to the title of your house, which means it will automatically become an asset in his collection proceedings. This may result in a lien against your property. You can prevent this from happening by taking proactive measures before the dower rights are enacted. That’s why it’s so important you understand the full implications of marriage and existing debt.
Establish or update your will
As a married couple you now have obligations and responsibilities towards each other. As such, it’s important to determine what would happen if you or your spouse were to die.
In Iowa, including most other states, your spouse is legally entitled to a percentage of your property after you die, unless you have a written agreement to the contrary. If these aren’t your wishes, you need to specify that in your will.
In Iowa, wills must be in writing and signed by the person making the will. The signature must be witnessed by at least two disinterested parties. Witnesses are there to ensure the person making the will appears to be of sound mind and isn’t being forced to make the will. A will can be changed with a written amending document—called a codicil—which also must be signed and then witnessed by two parties.
Some couples create joint wills to serve them both. This type of will prevents the surviving spouse from changing what happens to the property after the first person dies.