We begin many chapters in life, and the one regarding marriage is one of the most exciting. Before you get caught up in the bliss of planning your big day, you and your partner must have various financial conversations. You two should also discuss whether a prenup agreement is in both of your best interests to protect your individual assets. We’ll explain the financial implications to understand when getting married in this guide.
Financial Benefits of Marriage
Getting married has many benefits, as you have someone to share life responsibilities with. Some key things to note include:
- Better insurance
- Access to better credit
- Tax breaks
- Better social security
Below, we go into further detail on each of these benefits to help expand your knowledge.
Insurance generally comes at better rates for married couples for a few reasons. Health, dental, and eye insurance may be cheaper because you can access one another’s plans. Your employer may have a high deductible, or the plan may not be ideal based on your medical needs.
Once you get legally married, your partner can add you to their insurance plan. Generally, employers allow for a 60-day Special Enrollment Period for you to alter your current insurance after the wedding, so you don’t have to wait until open enrollment.
Most married couples also have lower rates for car insurance; rates vary depending on age and individual accident history. Car insurance companies tend to believe married people drive more carefully and are less likely to get into accidents.
Access to Better Credit
While getting married doesn’t improve your individual credit, both of you have access to one another’s and can use either when taking out a loan. Likewise, you can co-sign on loans or big-ticket purchases such as a car or home. You can determine which provides the lowest loan interest rate when both of your credits are available to use.
Depending on how you file your taxes, you may receive tax breaks. Often, these tax breaks depend on whether you file jointly or separately, your income, and which tax bracket you fall into. We recommend working with a financial expert on the best way to file your taxes if you’re ever in doubt about what to do. You should also have an open conversation with your partner—before the wedding—about your future financial goals.
Better Social Security
In the event of death, a surviving spouse may be eligible for up to 50% of the other partner’s social security. The Department of Social Security will review this eligibility percentage on a case-by-case basis, so it’s best to talk with them.
Conversations To Have Before Marriage
While getting married has many financial benefits, as previously mentioned, you and your partner need to have a few conversations about the future. Money is a hot topic, and all partners don’t share 50/50. Both of you should discuss the following:
- Individual financial goals
- Financial responsibilities (or how you’ll divide the money)
- Prenup pros and cons and whether it’s best for you
By understanding the financial implications before getting married, you can protect your hard-earned money and work together as you plan. So, keep your conversations open and constructive so you both can explain your opinions on the topic. Work together to conclude what both of you feel is fair if you disagree.
Separate Financial Goals
Before you two met, you each had goals for the future. How much money did you want to save per year? How much money did you put into your 401K? Discuss an ideal saving rate for how much money you want to put into your retirement accounts.
Although you may already have an idea, it’s best to discuss whether you’d save or spend money. Disagreements can arise if one of you constantly spends money on frivolous purchases while the other prefers to save for the future.
How You’ll Divide Your Money
You two should decide whether you want shared funds, two separate accounts, or a mix of both options. It is important to note that, in Colorado, no matter how you determine how to divide your money, your earned money or any increase in value in your separate or joint property is marital and will be divided if you ever need to divorce or legally separate. Most individuals think keeping their accounts separate or solely in one name is enough to deem it separate property at the time of a divorce; in Colorado, this separation is not valid without a prenuptial or postnuptial agreement. Discussing these agreements with your partner is always best so you can work as a team to find a solution if you disagree. It also helps to work with a lawyer to legally bind your financial agreement.
Sharing a single account gives both of you access to the same pool of money. While this provides a higher income, it can also make it harder to make individual purchases, such as traveling with just your friends. You’ll need to talk with your partner before withdrawing money that doesn’t go to both of you, especially if you remove higher amounts of cash.
Having separate bank accounts makes you more likely to feel financially independent. Moreover, this doesn’t mean both of you are alone, as you’ll still split expenses. On the downside, one of you may feel at a disadvantage or have to use most of your paycheck to help with household expenses if the other earns significantly more.
A Mix of Both
A healthy mix of both options is generally ideal because you can share a household account for all essential purchases and have separate money for individual purchases. You can use your individual cash if one of you wants to go to the spa.
Sign a Prenup
You may have an issue in the worst-case scenario of a divorce or death of a partner if one partner has sole ownership over every asset. By signing a prenuptial agreement, you’ll decide how to split joint and individual assets. In your prenup, you’ll also choose whether a spouse will pay the other alimony and how you’ll split debts.
You must work with a family matter lawyer when signing a prenup. Otherwise, the document could be less legally binding and at risk for being deemed invalid in court if challenged. Additionally, both partners must be willing to sign the document. Decide on a reasonable alteration if one partner does not agree to all the details. Your attorney can assist with the process as you create your individualized prenup.
What’s a Postnuptial Agreement?
A postnuptial agreement, or “postnup,” has the same goal and purpose as a prenup—protecting your shared assets in the case of a divorce or death. However, unlike prenups, you create and sign postnuptial agreements after marriage.
Contact Jones Law Firm, PC
We’ve served the families of Colorado for over 20 years and put protecting our clients above all else. Schedule a free consultation with our law firm to secure your future with a pre- or postnuptial agreement.