As a society, we spend a lot of time thinking and talking about love and marriage. What is rarely discussed, though, is the legal side of a marriage. That’s the focus of this episode. Even if you are already married, understanding exactly what the legal aspect of a marriage contract entails is important. Whether you’re single, engaged, or already wed, think of this as one more way to empower yourself.
One of the most important things for you to know about a marriage is that when you sign a marriage contract, you are also agreeing to your state’s default prenuptial agreement. Since the divorce rate is not zero in our country, it makes sense for you to understand exactly how your state views divorce. It is also why I recommend everyone get a prenuptial agreement.
Another aspect of marriage that impacts your finances has to do with your tax-filing status. With recent changes to the tax code, the state and local tax (SALT) deductions are different for married versus single filers. There are also differences between the standard deduction if you are married filing jointly versus an unmarried couple that has one partner filing head of household and another filing single.
Some of the benefits to tying the knot from a legal perspective include the gift tax and the built-in estate planning that comes with a marriage agreement. As a married couple, the gift tax is unlimited between partners. Though having estate documents specific to your situation is ideal, marriage does typically make your spouse your next-of-kin automatically in the eyes of the law. Additional benefits include the shared estate tax and spousal IRA.
There are also reasons why people might consider postponing marriage. If you would have a blended marriage--meaning that one or both spouses have kids from a previous relationship--it is important to give thoughtful consideration to that. Understanding how child support works and what you and your spouse’s responsibilities are to all children within the family is key.
Finally, it is vital to remember that marriage does not fix money problems. In fact, quite the opposite can happen. Marriage can sometimes exacerbate financial tensions. That means that it is important for you to make sure that you have a handle on your own financial situation and an understanding of your partner’s before you make this big move.
In this episode, we also explore:
- A brief history of marriage and how it’s changed recently
- The physician divorce rate and what divorce looks like in community property versus equal distribution states
- How to best utilize real estate professional status (REPS) as a married couple and other financial benefits of marriage
- How unmarried couples can reap different tax benefits
- The complexities of blended family life and the planning surrounding it
- Ways to invest in your own marriage
- Some of my own experiences in an engagement instead of a marriage
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Featured on the episode:
- Read more of my thoughts on love, marriage, and a legal contract in my blog post here.
- Get a refresher on real estate and real estate professional status (REPS) in episode 8.
Learn more about how to manage your mindset with Wealthy Mom MD.