Will Marriage Help Your Finances?
You know you’re in love and you know you want to spend your life with your partner — but does getting married help your finances, or leave them worse off? Before you walk down the aisle and commit to each other “for richer or for poorer,” make sure you understand the financial ramifications of your nuptials. That knowledge will help you set out on a “for richer” journey together.
The Financial Pros of Getting Married
In addition to commitment and a beautiful ceremony, marriage carries economic incentives as well. Major benefits of marriage include:
- Joint health insurance: If one of you has a great health insurance policy through an employer and the other doesn’t, getting married might be the easiest way to ensure both of you are covered. Not all employers allow adding a domestic partner to your health insurance policy.
- A bigger home: Assuming both you and your future spouse are employed, applying for a mortgage together will increase your chance of getting approved for a larger amount (and, consequently, enable you to buy a bigger home). Of course, bigger won’t necessarily be better if you overextend yourselves. The same applies to renting a home: your landlord will take both incomes into consideration, but make sure you’re not spending more than you can afford.
- Death benefits: The IRS generally does not tax spousal inheritance, except in the case of the very wealthy. Further, you might receive benefits such as Social Security and pension, which are generally not available to unmarried couples.
The Financial Cons of Getting Married
Some potentially serious financial problems arise when you walk down the aisle. Considering the ramifications before you get married is essential for planning the best financial future for you and your spouse.
- Money management: If partner has trouble managing money wisely, trouble can ensue for both.
- The marriage penalty: Simply put, because one spouse’s income will be tacked on top of the other for tax purposes, their whole income will fall within higher tax brackets compared with each of you filing single. However, higher deduction limits largely offset the marriage penalty, so it shouldn’t be a major concern. If in doubt, you can always discuss the details with an accountant or run joint vs single filing scenarios through your tax preparation software.
- Liability: Financial judgments on joint accounts affect both spouses. If your partner goes bankrupt or doesn’t pay bills on joint accounts, you can be held financially liable.
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