You're planning a fairytale ceremony to unite two loving hearts in everlasting, starry-eyed marital bliss, but that doesn't mean you're oblivious to the attendant practical matters. A modern marriage is entered into with love and a level head. Let the intoxicating fog of romance clear for a moment and consider, with the expert advice of Allentown Attorney Elissa Griffith Waldron, the legal concerns every couple needs to navigate.
What's up with the prenup?
A prenuptial agreement is a contract designed to protect the assets you bring to a marriage and set forth financial rights and responsibilities as a married couple.
Prenups seem unnecessary to most young couples who wed for the first time, according to Attorney Waldron. “Most people who get a prenup are those marrying for the first time at a point in their lives when they've had time to acquire an asset base that they want to protect,” she says. These assets could be real estate, businesses, retirement funds from all sources, et cetera. If you're marrying for the first time in your 30s, with a good decade's worth of assets under your belt, a prenup is a good idea.
Even if you enter a marriage with nothing but the wedding gown on your back, a prenup can modify the default property rights of marriage: once married, any property either of you acquires is considered marital property, even if only one of you pays for it, absent a prenup. That goes for debt, too, as Attorney Waldron warns. “Say you're married to Bob, and Bob gambles $20,000 a year, using his own credit card. That may be considered marital debt in a divorce.” If that's an issue you'll need an aggressive attorney. A prenup can protect you from having to take on your spouse's financial obligations, as well as protecting your own assets.
Some people try to write a prenup themselves, but when it comes to enforcing the terms of the contract, you can run into trouble if it doesn't accurately follow the law. It's best to seek counsel on this matter. Despite its practicality, only five to 10 percent of marrying couples get a prenup. It may seem cynical, but formally hashing out financial plans can help forestall future conflict over misunderstandings, giving your marriage real staying power.
How do we fuse our finances?
It's up to you how you want to arrange your finances once you're married. A 2008 North Carolina State University study found that finances are a bigger source of conflict in a marriage than communication issues. Knock them both out by taking the time to sort out a financial arrangement that works for both of you.
Most couples merge their finances at least partially, each keeping individual checking accounts, as well as a joint account for shared expenses. Each of you might put one or two paychecks a month in the joint account and use it to pay for household expenses like rent/mortgage and utilities. Maybe one of you makes two-thirds of the income and agrees to contribute a proportionate amount. You may want to set up a joint savings account and both contribute to some big ticket goal like one of those cozy L-shaped couches or a trip to Switzerland.
Some people find they're comfortable handing the financial reins over to their spouse completely, especially if they're opting to stay at home. Attorney Waldron suggests you make sure you have access to your money. “It's not that unusual to see a woman as young as 35 who has only a debit card funded by her husband,” Waldron says. Financial dependence can have consequences later on—in the case of a divorce, that woman might find herself without money to live on.
Decide what to merge and what to keep separate, respect each other's personal financial priorities (comic books? shoes?), and you'll have it figured out in no time.
Maiden name: To change, or not to change?
You can decide to take your husband's name, hyphenate your name or come up with a new name entirely, and obviously choosing not to change your name at all is no reflection on your love or commitment.
According to a 2004 article in the Journal of Economic Perspectives, only two percent of women kept their names in 1975—at present that number's more like 33 percent. In this modern age, many women see no need to give up their given surnames. “An easy and popular option,” Attorney Waldron says, “is simply tacking your husband's name onto the end of yours.” Win-win. This process is free of charge along with getting married, and satisfies both the bride's independence and the desire to symbolically unify your new family. Most couples are comfortable giving their children the husband's surname as well.
If you do make a change, you'll have to notify a number of entities, starting with Social Security, the DMV, your credit card companies and your bank. You'll want to update your passport, too, but make sure your ID matches your booking information if you've already set up your honeymoon!
How does tying the knot affect taxes?
Once you're married, you have to decide whether to file your taxes jointly or separately. “Filing jointly offers advantageous tax brackets,” Attorney Waldron says. “Especially with the dependency deductions once you have children.” If one of you makes a lot more money, combining your incomes by filing jointly can bring that income down to a lower bracket. You can also take advantage of certain tax credits only available to couples filing jointly, such as student loan interest deductions—and who wouldn't prefer preparing one return over two?
So, filing jointly as a married couple is usually a tax boon, but when should you file separately? Filing separately can sometimes help you make the most of deductions like medical bills and business expenses, which are based on income.
Ideally, this would not be the case, but “you may want to file separately if you manage your finances separately or have separate businesses and may unfortunately not know much about your spouse's past tax liabilities,” Attorney Waldron suggests. If one person is not up to date with their taxes, and you file a joint return, the IRS can come after either of you at the end of the year.
Is it time to take on estate planning?
It seems a little morbid when you've just been sampling cake and poring over floral arrangements, but this is a good idea to consider setting up a Will and Last Testament, a Living Will and a Power of Attorney. “Many attorneys will offer all three of these as a combo package,” Attorney Waldron says. “They're very important to help your loved ones if anything should happen to you.”
Most young couples will have Reciprocal Wills, where everything goes to their spouse in the case of their death. Some couples choose to allocate the statutory spousal share to their spouse, which is one third of the estate, and leave the remaining two thirds however they want. Your living will directs your loved ones on your wishes regarding medical and life-prolonging treatment in the event that you're incapacitated. Similarly, a Power of Attorney form gives someone you trust authority to make legal and financial decisions on your behalf if you're unable to do so.
As grim as it is to consider, these documents can help your family make decisions at a time when decision-making is very hard to do. There may not be much estate planning to arrange at first, so Attorney Waldron suggests a “check-up” with an attorney once you've acquired considerable assets within your marriage.
Elissa Griffith Waldron Esq.5100 Tilghman St., Suite 265, Allentown 610.434.9890 | elissawaldron.com
