Marriage and Your Financial Plan

Congratulations!  You planned and executed a wonderful wedding experience.  Now it’s time to kick back, relax and enjoy married life.  Not so fast!  Here are the five financial planning actions you need to take now that you are married.

Update Your Account Beneficiaries

The first step, changing account beneficiaries, is fairly quick, easy and very important.  If you are in your 20’s and getting married for the first time, you might have your parents still listed as beneficiaries on your work retirement plan account, such as your 401(k), 403(b), or SEP IRA.  Maybe you are still working on the whole “adulting” bit and never even added account beneficiaries to begin with. That’s OK.  No judgment here.  But, now is the time to add your new spouse as your primary beneficiary and move your parents or siblings to be contingent beneficiaries (the backup recipients in case your spouse pre-deceases you).

If this is a second marriage for you and you have children, updating beneficiaries might take some more thought and guidance from an estate planning attorney to determine what accounts are best left to whom.  Regardless of what you decide, you surely don’t want to leave your ex-spouse as the beneficiary by accident.

Don’t forget about your life insurance policies, annuities, and any accidental death and dismemberment insurance policies you might have.  A simple beneficiary change form is quick and easy to complete.  Then, go home and tell your new spouse, “Hey, I made you the beneficiary of my 401(k) and my two life insurance policies today because I love you that much!”  You might even guilt them into doing the same thing for you.

Change Your Income Tax Withholding Forms

Updating your income tax withholding and filing status is fairly easy to get checked off your post-wedding to-do list.  Now that you are married, you will want to change your federal and state tax withholding forms to reflect your new filing status.  Fill out a new federal W-4 form by first choosing “Married Filing Jointly.” Then complete the rest of the form to see if you should claim withholding allowances or have extra taxes withheld.  This will change the dollars withheld and your take home pay.  Also, fill out the appropriate state tax withholding form.  For example, North Carolina residents fill out an NC-4 form to update their filing status and withholding preferences.

Before you file your tax returns after the year end, it’s a good idea to check in with your partner about their expectations about income taxes.  One of you might be accustomed to getting a nice, fat tax refund, while the other doesn’t like to provide an interest-free loan to the government and typically owes money at year-end.  Communication is key in marriage, and a surprise tax bill could cause trouble.  In some cases, couples will want to file separately.  There may be valid reasons to do so, but when using Married Filing Separately as your filing status, you may miss out on some tax advantages of filing jointly.  Seek the guidance of your tax professional or CPA to determine the best strategy for you.  Once you’ve filed for the first time together, you can then adjust to have more or less withholding, if desired, by filling out new withholding forms again.

Examine Your Health Insurance Options

After a honeymoon, health insurance might be low on the list of things to talk about, but choosing coverage wisely could save you some money and help you pay the wedding caterer’s bill.  Each of you should check with your employer to see about the cost of adding a spouse to one plan vs. another.  You might find that adding spousal coverage to one plan is less expensive than you both paying separately.  If you already have children, putting everyone on one plan might maximize potential savings.  Not covered by an employer’s health insurance plan?  Under the Affordable Care Act, marriage is considered a “Qualifying Life Event” that makes you eligible for a “Special Enrollment Period.” You can then select new health insurance outside the yearly “Open Enrollment Period” and not have to wait to realize potential savings.

Revise or Create Your Estate Plan

Creating an estate plan can be hard to tackle, but it’s very important.  Now that you are married, you probably don’t want your parents making health care decisions for you instead of your spouse, in case you were incapacitated.  The same goes for handling money for an incapacitated spouse.  Hiring an estate planning attorney is a very wise investment for you two to make.  While it’s easy to put it off, drafting or updating your wills, durable powers of attorney, health care powers of attorney and advance directives is vital.  It won’t break the bank, and, if you tell your parents about it, they will be very impressed by your level of maturity!

If this is a second marriage for you and you have children from previous marriage(s), updating your estate plan is even more important.  You have decisions to make about what accounts, assets, and life insurance benefits are best left to your spouse versus your children or their children or charities.  An estate planning attorney may recommend strategies and tools, such as a revocable trust, to accommodate your specific wishes.

Update Ownership of Assets

If one of you already owns a home, it’s time to discuss adding your spouse to the title. An attorney can help with deciding whether tenancy by the entireties – the traditional manner in which married people have jointly owned real property – is the best choice. That attorney would also check to see if changing the ownership could create a problem with your mortgage holder.  The key thing is to make sure a surviving spouse is able take over ownership (and assume mortgage payments), if that is desired, without any issues.  Additionally, this is the time to examine whether each of you have sufficient life insurance policies to ensure mortgage payments could still be made or the loan could be paid off, if one of you were to die.

If you own other real estate, like a rental property, talk with your estate planning attorney about how that asset should be titled.  Also, you can change ownership on vehicles to joint with rights of survivorship, if desired, to smooth out the process of leaving assets to your surviving spouse.

Take care of these five main issues first, then you’ll have plenty of time to debate your individual spending habits.  Just kidding, don’t do that.

-Dave Werle

You may also like:

Enlightened Wedding Planning

Passing Along Good Financial Habits

Money and Marriage the Second Time Around

Any opinions are those of David Werle and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. This material is being provided for information purposes only. Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.

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