Marriage offers many financial advantages and pitfalls. / Image: Marcus Hansson/Flickr/CC BY

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.

Shared expenses

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 advantages

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.

Sources

Time Business
MSN
USNews

When divorce hits your eye like a big pizza pie, that's when you wish you had a prenup. (Photo Credit: CC BY-ND/Ohio Prenuptial Agreement)

The April 29 royal wedding of Prince William and Kate Middleton is fast approaching, and amid the usual fanfare surrounding the fairy-tale ceremony, consumer advocate Clark Howard noticed something curious. There’s a great deal of urging in the U.K. media for Prince William to sign a prenuptial agreement before the wedding. Contracts specifying the division of assets are encouraged by many financial planners, particularly when property and wealth are involved.

What is a prenuptial agreement?

Regardless of the nomenclature – prenuptial agreement, prenup, prenupt or premarital agreement – a prenup is a legal contract signed before a marriage or civil union. While the terms of the agreement can vary, specifications for how community property and spousal support are to be divided in the event of divorce are most common. Provisions for child guardianship and forfeiture of assets in the event of indiscretions like adultery may also be present.

Postnuptial agreements are similar to prenups, but are formed after a couple is married.

Divorce is a fact of life

One in three first marriages and at least half of second and third marriages end in divorce, reports Bankrate, so financial experts say prenuptial agreements are a good idea.

“Marriage is not just an emotional and physical union — it’s also a financial union. A prenup and the discussions that go with it can help ensure the financial well-being of the marriage,” said New York City financial adviser Nancy Dunnan.

Contrary to popular belief, a couple doesn’t have to be Prince William and Kate Middleton for a prenup to be practical. If a person has managed to sock away a nest egg, protecting it is worthwhile.

“Those are sometimes the most jealously guarded assets because it has taken a lot of hard work to accumulate a small amount,” said Iowa lawyer Joseph Zwack, author of “Premarital Agreements: When, Why and How to Write Them.”

Signs you should have a prenup (or postnup)

According to Bankrate, if any of these things apply and you are about to marry or are already married, consult with an attorney:

• You own a home, business, stock or retirement funds
• Your business venture may lead to a large increase in income
• You may be receiving an inheritance
• You have children or grandchildren from a previous marriage
• There is a significant imbalance of wealth between you and your spouse
• One spouse will be putting the other through college
• You have elderly parents who require care
• You have or are pursing a medical degree or similarly lucrative license

How to proceed if you want a prenuptial agreement

Dunnan recommends you approach the topic with your mate as early as possible, and Palm Beach County, Fla., lawyer Michael McDonough says honest discussion is important. So long as both parties have an attorney – ideally matrimonial lawyers familiar with prenups and the laws of the state in which you’ll live together – a fair agreement is possible.

Sources

Bankrate.com

Clark Howard

Wikipedia

‘He fell in love during the flight’

As the U.S. changes, "family" is taking on new definitions. (Photo Credit: CC BY-SA/Iverson/Picasa)

There are many ways to define the concept of marriage. Whether it is considered an affirmation, commitment, bond, contract or any combination of such concepts, one thing a recent Pew Research Center study suggests is that marriage may be becoming obsolete in the United States. The Associated Press reports that not only are divorce numbers still high, but more children than ever are living in single parent families where that parent is divorced, separated or never married.

Does marriage define family?

In conjunction with Time magazine, the Pew group study indicates that not only is the notion of the importance of marriage in flux, but the definition of the American family is more fluid than ever. The sea change has reportedly prompted the Census Bureau to adopt broader definitions of what constitutes a family, particularly where matters of poverty and unmarried couples are concerned.

Marriage does not dominate family life the way it used to, according to the Pew group. Dr. Andrew Cherlin, sociology and public policy professor at Johns Hopkins University, told the AP that “Now there are several ways to have a successful family life and more people accept them.”

The new American family, by the marriage numbers

According to the Pew marriage and family study, 29 percent of children live in single- or two-parent families who are unwed or not longer married. That’s five times the number of such families in 1960. The big number is 39 percent; that’s the percentage of Pew respondents who said marriage was becoming obsolete. In 1978, just 28 percent of Americans felt that way. Considering the U.S. census data from September 2010 – where marriage was down to an all-time low of 52 percent of adults 18 and older – it becomes clear that the Pew findings are no coincidence.

Mercy, mercy me (the economy)

While most Americans seem to agree that a married couple constitutes a family, a whopping 80 percent of respondents also recognized a family as “an unmarried, opposite-sex couple with children or a single parent,” while 60 percent recognized same-sex couples with children as families. Economic conditions have played a major role in unmarried cohabitation. For opposite-sex unmarried couples, numbers jumped by 13 percent from last year alone. Long-term marriage commitment has declined in the face of unemployment, and as benefits such as health insurance become more readily available to “alternative” family structures, marriage rates have declined.

Sources

Associated Press

New Yorkers’ views of marriage

In terms of divorce, are there health concerns to consider? (Thinkstock)

The effects of separation are crucial. According to the recent Census Bureau report released earlier this month, there is an increased number of single Americans, and about 106.4 million citizens are included in this group of households. The primary causative factor of this growing rate is divorce. Divorce is another stage of adjustment. It is a sensitive family issue that primarily should bring stability and security among every household member.

Irony of marriage

Divorce is a life-changing event, just like marriage. Marriage is a challenge; it is a life-long commitment and exploration. It is an adventure in which many couples  find happiness and contentment. Marriage is a mixture of joy and pain, pleasure and difficulty, and love and sacrifice. Today, couples are resorting to the separation of this life-long pledge for various of reasons. Infidelity, incompatibility, violence and miscommunication are some of the many reasons why couples choose to divorce.

Statistical outcomes

America’s health departments conducted several studies on modern family life. The National Survey of Family Growth is the study that focuses on nationwide family issues regarding marriage, fertility, divorce, pregnancy and children’s health. Divorce rates for the past five years were one of the data-gathering projects facilitated by the group led by Bramlett, Matthew and William Mosher.

In the research, women ages 15-44 years old were used as a sample in 1995. It was published in National Center for Health Statistics that 43 percent of the marriages studied ended in a divorce. Most couples in crisis overlooked the option of obtaining a payday loan or an installment loan to help fund marriage counseling.

Health concern

Divorce is also a health concern. Its aftermath is critical, though there are valid reasons for every separation. Children, however, are the most affected in every divorce. Just like any couple, they also experience certain adjustments and a change in routines. Health compromises the entirety of an individual’s wellness. The physical, socio-emotional, psychological and spiritual dimensions are included in assessing health. It is a continuous re-examination of the advantages and disadvantages of the decision.

For better or for worse

Research psychologists E. Mavis Hetherington and John Kelly published a study titled “For Better or for Worse: Divorce Reconsidered” in 2002. Their investigation proved that 25 percent of children are distressed by divorce. These children considered separation of their parents as a traumatic event. Invalidating marriage also causes stages of grieving — denial, bargaining, anger, depression and acceptance. The processing of pertinent documents is fast. However, it takes years to accept the reality of farewell.

Sources

The Huffington Post

Match.com on Yahoo!

It’s difficult to manage cash today, and a divorce can make it twice as difficult. In particular, when tax time comes, it’s important to understand how to file as a single person again. Consumers are cautioned to watch out for a few important steps when it comes to tax planning.

• Hire a professional. Don’t try to wade through tax time alone after a life change like a divorce. Consulting with an attorney or tax advisor is crucial at this time, because they can make light of your specific financial situation. It’s best to get an estimate of joint and separate filings. Of course, this can only happen if there is or was an agreement in the divorce and some divorcees may be forced to file singly. If this is the case, a tax advisor can help you file the right way to save the most money.

• Remember the name change. Many wives take their husband’s last name or hyphenate their last name after a marriage. Once a divorce is finalized, remember that it takes up to three weeks for a name to legally change, according to the Social Security Administration. What is crucial is that your name on your tax return matches your name as registered with the Social Security Administration’s office. You’ll need a Form SS-5 to change your name if needed.

• Filing status. Your status determines standard deductions, so it is very important to understand. It also dictates whether you can claim certain deductions and credits. A tax professional will tell you that all of the above are decided by your marital status at the last day of the tax year, December 31st. For example, if you are divorced under a final decree on the last day of the year, then you are considered single for that tax year.

It’s critical to understand the above when filing and any good tax lawyer or professional can guide you through making the right decisions for your situation. You may be divorced, but that doesn’t mean you won’t still be responsible for previous joint returns, taxes, interest and penalties. Be sure to follow up with your spouse to get them all in order.

Things to watch for

In addition to watching for taxes, you also have to watch for cash today in other areas. Here are some important things to remember:

• Alimony is taxable to the year it was received
• If you adopted your spouse’s child, you’ll need a Social Security Number or Adoption Taxpayer Identification Number
• Child support is not taxable to the recipient or deductible by the payee
• A QDRO, or Qualified Domestic Relations Order, is crucial, because it sorts out the pensions of both parties and court orders equitable distributions
• Legal fees and court costs are not deductable, but the cost for tax advice related to a divorce may be

Understanding a divorce and taxes

A divorce can seriously change tax procedures and filings. Make sure if you are going through a divorce, you understand what rules best benefit you. A good tax advisor or attorney can help you make critical decisions on what to do about taxes, filings, and cash today.

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Divorce can seriously complicate finances like unsecured loans, savings and investments. If divorce is in your imminent future there are some things to begin thinking through. First of all, set some post-divorce financial goals. You want to stay focused on where you want your retirement savings to be, how much money needs to be in a college fund, and how you are going to reduce your debt. Second, make sure you review all your paperwork regarding shared accounts. This can include savings accounts, credit cards, loan documents, unpaid tax bills, and estate planning strategies. Finally, research your state’s QDRO, or Qualified Domestic Relations Order. This is a document that will prevent your spouse from making retirement account withdrawals while the divorce is in progress. Remember that if at all possible, it is highly advantageous to settle disagreements amicably and avoid paying thousands of dollars in lawyer’s fees.

The first order of business when facing a divorce

The first order of business should be protecting your financial situation. You’ll need a trusted lawyer who is well-versed in divorce and settling assets. It is crucial to hire a lawyer who knows the laws that affect divorce proceedings and the impact they have on your finances.

Dividing assets

Normally assets accumulated throughout the marriage are up for splitting. The exception to this rule however, is inheritances individually gifted. When assets are split, the court will consider each spouse’s earning ability, how much each contributed to the overall household assets and the length of the marriage. There are states that have exceptions though. In community property states like Arizona, California, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin, all assets are divided equally between spouses.

Debt and the divorce

One of the biggest issues to address in a divorce is debt. Divorce does not eliminate debt. In fact if you are in a community property state, debt is split down the middle just like assets were. The caution in these states is that half the debt from one spouse, is shared by the other. Unsecured Loans, credit cards or retail credit can all plague the spouse who never created them. If you are in a non-community state then debt belongs solely to the spouse who incurred it.

The issue of debt is also relevant if married couples had joint accounts. These are important to address immediately because your spouse could continue to rack up debt and then leave you with it. All accounts that are shared should be frozen. Notify creditors of the situation and most will stop all charges to the account. Almost every major credit lender has a procedure to handle divorces.

Retirement assets settled

Money that is kept in a 401(k) account or pension plan can be divided up in a divorce. The amount included in the division is made up of funds accumulated from the time the marriage began to the time when the marriage ended. To claim a portion of your spouse’s 401(k) you need to have a court ordered QDRO and submit it to your spouse’s plan sponsor before the distribution period is finished. Some couples also opt to leave retirement funds untouched throughout a divorce. Particularly if the amounts for each spouse are close in value, this can be a viable option in handling the situation.

Estate planning

Finally, although unsecured loans, credit and savings are important, so is your future. Be sure to review your will and other documents to ensure that money is going to a new beneficiary. Those getting a divorce are cautioned to not wait to address the issue of estate planning. Review and amend an estate plan while carrying out the divorce proceedings. Though it is a difficult time for anyone when he or she is going through a divorce, securing their future is important. Taking pains to handle money wisely can protect assets and your future.

Tiger Woods (Image from keithallison, Flickr.com)

For days we have been reading about Tiger Woods and his now notorious escapades. He has had the time of his life with his fame, fortune, and frolics. News is now coming out that Elin Woods, the estranged partner of Tiger, is seeking a divorce. The reason mentioned is that Tiger refuses to enroll in rehab after his transgressions. Elin has sought sole custody of their two children, along with 50% of Tiger’s estimated $600 million fortune. The figures of his estimated fortune are most likely real and will not send Tiger on a leather hunt for personal loans, but instead, spend some money hiring a lawyer to sort matters out for him.

Paying Big Bucks for Services Rendered

Looking at the demands, one might think that Elin is perhaps trying to make some extra cash out of Tiger’s fortune. Of course, the question should be asked whether she deserves any of it. Most people would definitely answer with a resounding YES. Here is lady who gave Tiger everything she had and stayed with him in the worst of his times, and she was never a public figure unless Tiger chose her to be. She cared for the children and was happy to be the wife of a public figure. No doubt she enjoyed the benefits that came along with his fame, but she never demanded them. But now that she has been thrust into public glare for the wrong reasons, she has decided to make her demands known. The amount she wants is bigger than most people can even think about earning in their entire lives, but it is one heck of a paycheck that Tiger now must write.

What of Tiger?

He will lose about 50% of whatever he has accumulated over the years. Though he will still not require a personal loan, it is sure to make a dent in the fortune he built up. Half of his wealth will go to his wife and does not include the costs that legal procedures will bring in. It is assumed that he will have a huge bill for legal services, but we can bet that he can afford it without the assistance of loans.

A Star Will Shine

Public memory is short. Tiger Woods was, and will ever be, known for the game he made popular, rather than for the affairs he had. Looking back, another public figure in the real estate world was in the news for similar reasons.

Donald Trump’s affair with Marla Maples was splashed on the front pages of most publishers when he was at his height. The divorce cost Donald close to $10 million, but people no longer remember Donald for his numerous affairs. They still know him for the real estate empire he built and continues to do so, as well as for the popular television series “The Apprentice”. Tiger will also return to the game once again. Sponsors who are now shunning him will be back in line, waiting for Tiger to sign on the dotted line. Even if he never makes the kind of money he commanded earlier, he will still make enough to keep him away from any personal loans. Perhaps the only one forgotten in this matter will be the tigress who will have to remain satisfied with the early pickings she got.

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