When it comes to weddings, we love it all, the style, the decor, the vows, even the logistics (we're seating plan nerds!).
But one thing we're not so fond of? The finances and the legalities.
They're not pretty, they're not fun, but no matter how long you've been with your partner, whether you already share pets, children, or property, it's still so important so sit down, and talk these things over before you get married.
It's not about prepping for divorce, and it's not about being a gold digger, it's about facing up to certain inevitabilities (paying taxes, talking healthcare, and preparing for retirement), and making sure you're as informed as you possibly can be.
Getting married might be all about dresses, suits, flowers and centrepieces, but people often forget that being married is about so much more.
What would you do if one of your parents got sick and needed to move in? Have you children from previous relationships to include in your will? Are either of you in debt? Have you talked retirement plans? These are all areas to discuss ahead of your big day.
So, to get you informed, and to give you a head start on the paperwork, the lovely Saskia Kerkvliet of Legal Templates is here to help, with her guide for what being married really means when it comes to legalities and finances, and a checklist for how to prep for it.
Of course, tax laws, pre-nups, and legalities around wills, differ from country to country, and state to state, so not everything below will apply to you, but even if it inspires you to sit down and have the ‘talk', then it's well worth a read!
Planning Your Life Together: Financial and Legal Considerations of Getting Married
Planning a wedding can be one of the most thrilling (and, let’s admit it, stressful) times of your life.
There are many choices to be make from the small details like flowers and bridesmaids dresses, to the big ones, like whether to have your wedding in a traditional church or break the mold by heading to the beach.
Amid an endless list of decisions to make during this planning period, each bride and groom should still take some time to consider the practical aspects of marriage before walking down the aisle.
Weddings are joyous occasions that bring together families in celebration, but behind the cake and flowers, it is also a ritual consolidation of your commitment to one another.
By signing the marriage license, you formally acknowledge your responsibility to care for your partner both legally and financially (and make them breakfast-in-bed every Sunday). Yet few people may really understand the implications of getting hitched.
So let’s explore some of the benefits and responsibilities to getting married from a legal and financial standpoint, and gain a better understanding of the legal documents you and your partner will need in order to leverage greater control over your future life together.
Financial and Legal Benefits of Marriage
Tying the proverbial knot brings a unique set of legal and financial rights which can carry over to your retirement and beyond.
Legally speaking, marriage status is poles apart from that of two cohabiting adults.
The benefits of marriage include:
Paying Less Tax
- – Pay less federal taxes on your income and get a marriage bonus when you file jointly with your partner if one of you earns more.
- – Beware of the marriage penalty if your combined incomes push you into a higher tax bracket.
- – Unlimited amounts of financial gifts may be made to your partner, completely tax free.
- – Save money by sharing a single joint health insurance plan.
- – If your employer sponsors your health insurance, you may still be able to add your spouse.
Greater Inheritance Rights
- – Lower tax rates apply when you or your partner passes away, meaning a greater proportion of your assets and wealth go to your spouse than if you were unmarried.
Maximise Retirement Plans and Social Security Benefits
- – In the event of your partner’s death, you may be able to roll over your spouse’s IRA or 401(k) plan into your own and postpone minimum distributions until you are 70½ years old. This will maximize your retirement payouts.
- – You also have the right to claim up to 50% Social Security benefits based on your partner’s earnings if they were higher than yours, known as “survivor’s benefits”.
Healthcare and Hospitals
- – If your partner is sick or injured and ends up in hospital, you have marital visitation rights as next of kin.
- – You may be called upon to make healthcare decisions on their behalf if they are incapacitated physically or mentally.
Easier to Buy Property
- – Mortgage lenders are likely to look more kindly upon a married couple than an unmarried couple or single person and be more willing to let them borrow money against a house.
- – Your combined incomes will give you greater spending power when investing in property.
- – If you divorce, your partner may be obliged to financially support you in the form of alimony with monthly payouts to secure your basic livelihood.
Be Smart: Other Essential Marital Documents
Of course marriage is not all about tax breaks and social security benefits – it represents the formal binding of your lives in many different respects. Surprisingly, few people realize all the legal implications of marriage.
For example, marriage may automatically invalidate your existing will. It’s also a common misconception that all your assets will automatically be handed to your marriage partner in the event of your death. In fact, this is defined by the laws of your state.
Here is where certain documents, like a Prenuptial Agreement and an Estate Plan come in useful. These documents can help you deal with all of the questions which arise around these marriage responsibilities and rights.
They can also assist you and your partner in making well-informed decisions that don’t leave you both at the whim of local default laws.
A prenuptial agreement is a great way to take greater control and protect your assets in the case of a divorce.
It may sound unromantic to prepare for the worst-case scenario as you prepare yourself to make the most heartfelt promises of your life, but it’s actually a very useful financial planning discussion to have and could save you tens of thousands of dollars down the line.
“Every married couple has a prenup, whether they want one or not,” Erik Newton says in a New York Times article. “The question is not whether you should have a prenup, but whether you want your state’s default version of one.”
For example, do you know if you live in a Community Property or a Marital Property state? If so, you’ll understand that there is a vast difference between how your property would be treated.
Estate planning sounds fun right? Exciting or not, you should consider drawing up an Estate Plan either before or soon after your marriage.
These documents can be a headache if you try to do them yourself, but an attorney or an online documents builder can make this process much more efficient and simple.
Having all these documents in place will bring many benefits to both of you, in terms of dealing with inheritance arrangements (especially important if either of you have children from previous marriages to consider) and health care decisions in the case of serious illness.
Your Pre-Wedding Financial Checklist
Legal and financial discussions with your partner in the run up to your wedding are very important in helping to ensure you’re both on the same page with your approach to finances and long-term goals.
It’s good to choose a time to broach these topics when you’re both relaxed and energized, and there’s no need to plan out everything in one go.
Put aside that huge pile of wedding magazines, take your time, and run through this prenuptial checklist item by item.
So much to consider! I really don't like to even think about the ‘D-word' and really ‘divorce-proofing' is not what it's all about. It's more about minimising conflicts down the line, and entering your marriage with a fresh start and an open book.
…So that you can get on to the fun stuff like cake-tastings and party playlists!
Download our Free Wedding Budget Spreadsheet.