Getting Married (or Divorced): Some Financial Guidelines
Marriage and divorce are emotional events, but each one also reshapes your finances. A little planning at the right moment can prevent costly mistakes. These guidelines apply to both.
When you get married
Talk openly about money
Share income, debts, savings, credit history and spending habits before or soon after the wedding. Agree on goals, a budget, and who will handle which bills. Decide whether to combine accounts, keep separate ones, or use a mix of both.
Update your tax information
Your filing status changes with marriage, and your combined income may call for different withholding. Each spouse should review their Form W-4. If you change your name, notify the Social Security Administration first so the name on your return matches their records; see ssa.gov.
Review insurance and beneficiaries
Compare health plans through your employers, revisit life and disability coverage, and update beneficiary designations on retirement accounts and policies. Those designations usually control who receives the money, no matter what your will says.
Plan for the long term
Set up an emergency fund, coordinate retirement savings, and consider wills and powers of attorney. If one of you owns a business or has children from a prior relationship, planning is even more important.
When you divorce
Gather the facts
Collect tax returns, account statements, mortgage and loan documents, retirement statements, and business records. A clear picture of assets and debts is the foundation of a fair settlement.
Think after-tax
Assets that look equal may not be. A dollar in a traditional retirement account will be taxed when withdrawn, while a dollar in cash or a Roth account generally will not. Appreciated property carries built-in gains. Property transfers between spouses in a divorce are generally not taxed at the time, but tax consequences follow later.
Address support and dependents
Alimony and child support are treated differently for tax purposes, and the rules depend on when the agreement was made. Settle which parent may claim a child, and who keeps head-of-household status, in writing.
Protect your credit and update your records
Close or separate joint accounts, refinance or assign shared debts, and change beneficiaries, wills and withholding. Remember that you may remain liable on joint debt even if the divorce decree assigns it to your former spouse.
File correctly
Your status for the year depends on your marital status on December 31. Joint returns from earlier years remain a shared responsibility, so keep copies.
Whichever side of this you are on, contact our firm and we can help you plan the financial steps.
This article is general information, not tax, legal or investment advice for your specific situation.