Life Events
Financial Guides
Table of Contents
- Legal Rights: What are the major differences between married and unmarried couples?
- What estate and financial planning steps are particularly important for unmarried couples?
- Do married couples need life insurance?
- If you change your name after marriage, who should be notified?
- Do I need to update my will when I get married?
- How can married couples hold property?
- What are the tax implications of marriage?
The prospect of planning for your family's life insurance needs may seem daunting. The array of confusing products available, coupled with the calculations needed to find the right amount of insurance, would put anyone off.
Yet the hard fact is that life insurance is an essential part of your family's financial well-being. The more you know about it before you go to your agent, the better your coverage will be. If you don't plan for your life insurance needs, the result could be a waste of thousands of dollars on inappropriate or ineffective life insurance or, worse, financial hardship due to not having enough insurance.
Your Tax File, Your Right
Legal Rights: What are the major differences
between married and unmarried couples?
When it comes to legal rights and being married vs. unmarried, there are several major issues to consider. Specifically, unmarried couples do not automatically:
- Inherit each others' property. Married couples who do not have a will have their state intestacy laws to back them up; the surviving spouse will inherit at least a fraction of the deceased spouse's property under the law.
- Have the right to speak for each other in a medical crisis. If your life partner loses consciousness or capacity, someone will have to make the decision whether to go ahead with a medical procedure. That person should be you. But unless you have taken care of some legal paperwork, you may not have the right to do so.
- Have the right to manage each others' finances in a crisis. A husband and wife who have jointly owned assets will generally be affected less by this problem than an unmarried couple.
Financial Tools
Do married couples need life insurance?
The purpose of life insurance is to provide a source of income for your children, dependents, or whoever you choose as a beneficiary, in case of your death. Therefore, married couples typically need more life insurance than their single counterparts. If you have a spouse, child, parent, or some other individual who depends on your income, then you probably need life insurance. Here are some typical families that need life insurance:
Families or single parents with young children or other dependents.
Families or single parents with young children or other dependents.
The younger your children, the more insurance you need. If both spouses earn income, then both spouses should be insured, with insurance amounts proportionate to salary amounts. If the family cannot afford to ensure both wage earners, the primary wage earner should be insured first, and the secondary wage earner should be insured later on. A less expensive term policy might be used to fill an insurance gap. If one spouse does not work outside the home, insurance should be purchased to cover the absence of the services being provided by that spouse (child care, housekeeping, and bookkeeping). However, if funds are limited, insurance on the non-wage earner should be secondary to insurance on the life of the wage earner.
Adults with no children or other dependents
Adults with no children or other dependents
The younger your children, the more insurance you need. If both spouses earn income, then both spouses should be insured, with insurance amounts proportionate to salary amounts. If the family cannot afford to ensure both wage earners, the primary wage earner should be insured first, and the secondary wage earner should be insured later on. A less expensive term policy might be used to fill an insurance gap. If one spouse does not work outside the home, insurance should be purchased to cover the absence of the services being provided by that spouse (child care, housekeeping, and bookkeeping). However, if funds are limited, insurance on the non-wage earner should be secondary to insurance on the life of the wage earner.
Single adults with no dependents.
Single adults with no dependents.
The younger your children, the more insurance you need. If both spouses earn income, then both spouses should be insured, with insurance amounts proportionate to salary amounts. If the family cannot afford to ensure both wage earners, the primary wage earner should be insured first, and the secondary wage earner should be insured later on. A less expensive term policy might be used to fill an insurance gap. If one spouse does not work outside the home, insurance should be purchased to cover the absence of the services being provided by that spouse (child care, housekeeping, and bookkeeping). However, if funds are limited, insurance on the non-wage earner should be secondary to insurance on the life of the wage earner.
Children
Children
The younger your children, the more insurance you need. If both spouses earn income, then both spouses should be insured, with insurance amounts proportionate to salary amounts. If the family cannot afford to ensure both wage earners, the primary wage earner should be insured first, and the secondary wage earner should be insured later on. A less expensive term policy might be used to fill an insurance gap. If one spouse does not work outside the home, insurance should be purchased to cover the absence of the services being provided by that spouse (child care, housekeeping, and bookkeeping). However, if funds are limited, insurance on the non-wage earner should be secondary to insurance on the life of the wage earner.
Financial Guides
What estate and financial planning
steps are particularly important for
unmarried couples?
Prepare a will. If both partners make out wills, the chances are that the intentions expressed in the wills will be followed after one partner dies. If there are no wills, the unmarried surviving partner will probably be left high and dry.
Consider owning property jointly. Joint ownership of property with right of survivorship is a way of ensuring that property will pass to the other joint owner on one joint owner's death. Real property and personal property can be put into this form of ownership.
Prepare a durable power of attorney. Should you become incapacitated, the durable power of attorney will allow your partner to sign papers and checks for you and take care of other financial matters on his or her behalf.
Prepare a health care proxy. The health care proxy (sometimes called a "medical power of attorney") allows your partner to speak on your behalf when it comes to making decisions about medical care, should you become incapacitated.
Prepare a living will. A living will is the best way to let the medical community know what your wishes are regarding artificial feeding and other life-prolonging measures.
Financial Guides
If one spouse changes their name
after marriage, who should be
notified?
You should notify all organizations with which you previously corresponded with your maiden name. The following is good list to start with:
- The Social Security Administration
- Driver's license bureau
- Auto license bureau
- Passport office
- Employer
- Voter's registration office
- School alumni offices
- Investment and bank accounts
- Insurance agents
- Retirement accounts
- Credit cards and loans
- Subscriptions
- Club memberships
- Post Office
Do I need to update my will
when I get married?
Absolutely. Your will should be updated often, especially when such a significant life event occurs. Otherwise, your spouse and other intended beneficiaries may not get what you intended upon your death.
Financial Guides
What are the tax
implications of marriage?
Once you are married you are entitled to file a joint income tax return. While this simplifies the filing process, you may find your tax bill either higher or lower than if each of you had remained single. Where it's higher it's because when you file jointly more of your income is taxed in the higher tax brackets. This is frequently referred to as the "marriage tax penalty." Tax law changes in the form of marriage penalty relief were made permanent by the American Taxpayer Relief Act of 2012, and remained in place under the Tax Cuts and Jobs Act of 2017 with the exception of married taxpayers in the highest tax bracket.
You cannot avoid the marriage penalty by filing separate returns after you're married. In fact filing as "married filing separately" can actually increase your taxes. Consult your tax advisor if you have questions about the best filing status for your situation.
Under a joint IRS and U.S. Department of the Treasury ruling issued in 2013, same-sex couples, legally married in jurisdictions that recognize their marriages, are treated as married for federal tax purposes, including income and gift and estate taxes. The ruling applies regardless of whether the couple lives in a jurisdiction that recognizes same-sex marriage or a jurisdiction that does not recognize same-sex marriage.
In addition, the ruling applies to all federal tax provisions where marriage is a factor, including filing status, claiming personal and dependency exemptions, taking the standard deduction, employee benefits, contributing to an IRA and claiming the earned income tax credit or child tax credit.
Any same-sex marriage legally entered into in one of the 50 states, the District of Columbia, a U.S. territory or a foreign country is covered by the ruling. However, the ruling does not apply to registered domestic partnerships, civil unions or similar formal relationships recognized under state law.
How can married couples
hold property?
There are several ways of owning property after marriage, but keep in mind that they may vary from state to state. Here are the most common:
Sole Tenancy. Ownership by one individual. At death the property passes according to your will.
Joint Tenancy, with right of survivorship. Equal ownership by two or more people. At death, property passes to the joint owner's. This is an effective way of avoiding probate.
Tenancy in Common. Joint ownership of property without the right of survivorship. At death your share of the property passes according to your will.
Tenancy by the Entirety. Similar to Joint Tenancy, with right of survivorship. This is only available for spouses and prevents one spouse from disposing of the property without the others permission.
Community Property. In some states, referred to as community property states, married people own property, assets, and income jointly; that is, there is equal ownership of property acquired during a marriage. Community property states are AZ, CA, ID, LA, NV, NM, TX, WA, and WI.
This Content is for informational purposes only. Nothing contained herein constitutes accounting, tax, financial, investment, legal or other professional advice, and, accordingly, the author and the distributor assume no liability whatsoever in connection with its use. This Content is not an exhaustive explanation of any topic, practice or process. You should seek the advice of a licensed professional before making any accounting, tax, financial, investment or legal decision.
