As June approaches many couple are looking forward to their intended nuptials. But have they considered the financial ramifications? Standard wisdom has it that two can live more cheaply than one. However, our ever-changing financial world begs many not-easily-answered questions which the informed couple should consider. While marriage offers many financial benefits, it comes with potential hazards, too.
Marriage premium on the decline
Married people increase their wealth an average 16% a year, while single people do so at half that rate, according to researcher Jay Zagorsky. Yet, research by the Russell Sage Foundation indicates that the financial advantage of marriage has been on the decline since 1969. The reason for this is that single women, even those with children, are better at supporting themselves than they once were. More women are working for competitive wages, and they are having children later in life.
Splitting the bills with a combined income is the most obvious way to make the economics of partnership work. Combining utilities make for substantial savings when split by a two-income couple. Tech spending also generally decreases . Shared internet connections, phone plans, and cable packages are some examples.
Property, which is more easily shared between married partners. Unmarried couples who jointly own a home find themselves in very tricky waters if they split up. This is especially true if only one of them has his or her name on the title.
Joint checking accounts
The same rule applies to checking accounts owned jointly by unmarried people. Either partner is capable of withdrawing money at any time, even if the couple splits. Generally assets gained during a marriage are considered joint property, though these rules vary by state.
Health care considerations
Although the rules differ greatly from employer to employer and from state to state, most providers offer substantial benefits for married couples.
Tax advantages and disadvantages
The tax burden of a married couple can be an advantage or a disadvantage. Whether filing jointly or separately,
married people often pend more than they did when filing singly. This is particularly true if both partners are high earners, forcing them into a higher tax bracket. However, the ability to share deductions for children, mortgage and other concerns can also result in substantial savings. The pros and cons in individual situations need to be considered to determine which outweighs the other.
Another tax advantage, which most new couples would probably rather not consider, is that married couples do not have to pay estate taxes. Widow and widowers alike inherit the wealth of their deceased spouses without paying federal estate taxes.
When the partnership dissolves
Marriage also offers financial advantages and disadvantages in terms of dissolution. When married couples divorce, one spouse often is legally required to pay alimony to the other. This is an advantage or disadvantage, depending on which side of the equation one stands. When unmarried couples split, there is generally no legal financial obligation on either side.