Start your marriage on firm financial ground
If you got married in 2002, your tax status is just
one of a host of financial situations that need attention in 2003.
Here are some of the issues you need to pay attention to this year
and some tips from top financial advisers on getting your marriage
off to a great start.
In the eyes of God and the wedding guests, you became husband and
wife when you said 'I do.' As far as the IRS is concerned, you were
married all year. The choice you'll face in 2003 is whether to file
a joint return or two returns as 'married filing separate.'
"They will most likely benefit from filing a
joint tax return," says Bob Doyle, a certified public accountant
and personal financial specialist at Spoor, Doyle & Associates
in St. Petersburg, Fla., but it's worth a conversation with your
accountant before you file a first return.
"It may be more advantageous to file married
filing separate if your new lovely spouse has a lot of back taxes
they never paid," Doyle says. "Once you file a joint tax
return, your liability comes into question."
Eva Rosen is an enrolled agent, licensed by the Treasury
Department to represent taxpayers who are in trouble with the IRS.
She's also an educator and author, but is best known on the Internet
as the Tax
Mama. She agrees with Doyle, saying she sees back-tax problems
most often with entrepreneurs.
"If you're getting married to someone who is
self-employed, you can almost be assured that they have tax problems,"
Rosen says the tax relief act passed by Congress in
2001 "basically boils down to not a heck of a lot" in
regard to reducing the infamous 'marriage penalty.'
"If you've just gotten married, your combined
standard deduction decreases by 26 percent (from when you were single),"
Rosen says. "It will take until 2010 for it to match the deduction
for two single people."
With your combined salaries, you may also find that
you're losing standardized and itemized deductions that phase out
at higher income levels.
If either your tax bill or your refund is large, consider
adjusting your withholding to accommodate your new tax status.
One of the first financial events for newly married couples is opening
a joint bank account and applying for credit cards.
Be sure that accounts can be accessed by either person
on their own -- it should be recorded as John or Mary Smith, not
John and Mary Smith. New brides also shouldn't forget to tell the
Social Security Administration if they're using their husband's
If you're moving into a house owned by your new spouse,
it won't be in your name. Should you be added to the mortgage? Doyle
says that in most cases, it doesn't make sense to do that.
If you have a retirement account, make sure your new
spouse is added as your beneficiary unless there's a prevailing
court order from a previous marriage that requires listing your
ex-spouse, or if you want the funds to go to your children or someone
else. Your spouse will need to sign off on that arrangement.
Stephen Wetzel, the director of the Certificate for
Financial Planning program at New York University, brings up one
unique but important scenario. If you own a house you inherited
from your parents, the title may be listed as "joint with rights
"If you die, it would go to your siblings, not
to your spouse," he says. "Retitle the property."
Speaking of houses, keep in mind that a home is a major investment
that will impact your family for years to come. Make sure you're
ready to be a homeowner.
be very tempting to buy a home," says Dianne Wilkman, president
and CEO of Springboard
Consumer Credit Management, a nonprofit consumer credit counseling
organization. "That's a huge commitment that will drive the
family finances in every other way. We do a lot of housing counseling.
Committing too much of your income to housing is very stressful."
Wetzel says he sees it, too. Even people who are earning
high incomes often are "in la-la land," he says, when
it comes to understanding how much it costs to buy and maintain
If ever there were a time in your life to look at your insurance
situation, it's now, says Dave Evans, vice president of retirement
and financial planning with the Independent Insurance Agents of
If you have life insurance (typically through your
employer), Evans notes that your spouse will automatically be your
beneficiary in most states, regardless of who is listed, unless your
spouse agrees to a different beneficiary.
In any case, you need to broaden your insurance planning
to include your spouse.
"You've got to really start thinking about, 'Do
I have adequate insurance?'" Evans says. "Think a little
forward. Insurance isn't necessarily guaranteed. Once you're married,
you need to start thinking out a few years. That impacts the kind
of insurance you might want.
"What's the right kind of policy given my new
set of circumstances? Term, whole life? We tend to buy insurance
for assets -- car insurance, mortgage insurance. With marriage,
you need to think more holistically. For some couples, forced savings
are not a bad thing. When my wife and I started out, the only money
we were saving was in a life insurance policy."
It's also an important time to look at your disability
insurance. Now that you have a family, your ability to earn an income
takes on added importance. The sooner you get it, the more affordable
it will be.
If you haven't done it already, you need to do it now that you're
"It doesn't matter how much you have," says
certified family law specialist, attorney, certified financial planner
and author Violet Woodhouse. "You may have employee benefits.
It's a major tragedy to not have some kind of estate planning done
that addresses various interests, especially if there are children
"If you don't have kids, you may want your money
to go to a poor relative or to a charity. Otherwise, the laws of
the state will dictate how it goes, and you have no control whatsoever."
Doyle says the top goal he has for newly married couples is to set
aside three months of living expenses in an emergency savings account.
"Don't worry about anything else until you do
that," he says.
Next, he recommends that both spouses participate
in a 401(k) plan, starting by maxing out the plan that has the best
After that, it's likely that the couple will buy a
"Now we've established a savings plan, a 401(k)
plan, we've got a house with a mortgage, and they're paying real
estate taxes and escrow. They're probably spent all their money."
Looking for more suggestions on starting off marriage
on the right financial footing?
- Take a look at this Bankrate.com
page, which provides plenty of info concerning marriage and
- Capital One offers this
list of questions to help couples talk about money issues.
- Also, check out this information on New
Families and Money from Consolidated Credit Counseling Services,
a Fort Lauderdale, Fla., consumer credit counseling agency.
-- Updated: Dec. 19, 2002