Financial Tips for Newlyweds, Including 3 “To Do’s”

Financial Tips for Newlyweds, Including 3 “To Do’s”

January 09, 2024

If you are a recent newlywed, or if you are planning to get married soon, chances are, you and your partner have found common ground in many important areas of life, such as whether or not you want children, where you will live and what you want to work toward together in the future. But one critical area that many couples avoid is financial goals. Too often, a lack of alignment in this area can cause disagreements, and they can create problems in the marriage.

A 2023 survey revealed that 67 percent of engaged Americans found it difficult to have a serious financial conversation with their fiancé or fiancée. Also, 70 percent of engaged Americans said they were facing money challenges during wedding planning, and more than half did not agree with their partner on financial goals. If you and your spouse are arguing over expenses related to wedding planning, that can be a revealing clue that you are not on the same page, financially speaking, and that it’s time for a serious talk about how you both view money.

Financial problems are not the leading cause of divorce, but one study from the National Library of Medicine says it's the fifth most common cause, with 37 percent of marriages ending for this reason. The top four causes of divorce were listed as a lack of commitment (75 percent), infidelity (60 percent), too much conflict and arguing (58 percent) and getting married too young (58 percent).

We encourage you to sit down with your partner and discuss finances, if you haven’t done so already. Meet in a quiet place free from distractions, and have that conversation, which can be tough but is necessary. Be honest about how much debt you are both bringing into the relationship, and make decisions about how you will both save money for the future.

And then, once you are married, be sure to take care of important financial paperwork, including the three “to do” items described below.

1. Change your name and address

If you change your name for any reason, including marriage and divorce, it is important to report that change to the Social Security Administration (SSA). Just like it’s important for your name on your driver’s license to match the name on your airline tickets and your passport when you travel, the name on your tax return must match the name that is on file for you with the Social Security Administration. If the names don’t match, it could delay your tax refund.

To update your name, file Form SS-5, Application for a Social Security Card. It is available on SSA.gov, by calling 800-772-1213 or at your local SSA office.

If you will be moving after your nuptials, you need to change your address with both the U.S. Postal Service (by going to USPS.com or your local post office) and the IRS (by completing and submitting the IRS Form 8822, Change of Address).

2. Change the filing status on your tax returns

When you file your taxes each April, you choose one of five different filing statuses: Single, Married Filing Jointly, Married Filing Separately, Head of Household and Qualifying Surviving Spouse. What determines your marital status is whether or not you are married on the last day of the calendar year. You do not have to live with your spouse to file your taxes as Married Filing Jointly or Married Filing Separately.

You are required to file under the status of Married Filing Separately if you are married as of midnight on December 31st of a tax year and your spouse refuses to file a joint return or if your spouse is a nonresident alien. When you and your spouse use the Married Filing Separately status, it means you each claim your own income and deductions on your own separate tax return. In general, this filing status results in the highest taxes and the fewest allowed credits and deductions, and it can result in more of your income being taxable in many cases, such as Social Security benefits.

If you file as Married Filing Separately, the standard deduction is $5 (five dollars) for one spouse if the second spouse itemizes his or her deductions.

Choosing this status might be the better option for someone whose spouse paid a lot of money out-of-pocket for medical expenses and filing jointly makes their standard deduction too high to qualify for itemized deductions.

Married Filing Separately also might be the better choice for couples who have a significant difference in their income. Filing separately can help the spouse with the lower income from being pushed into a higher tax bracket. Also, filing separately can be a better choice if one spouse is enrolled in an income-driven repayment plan because in this case, filing jointly could potentially increase the amount of monthly payments.

Married Filing Jointly is the most common filing status for married couples; this means you and your spouse file one tax return together.

In general, this status can result in a larger standard deduction and lower overall taxes on your income. Couples who file together can usually qualify for multiple tax credits, such as the Earned Income Tax Credit, American Opportunity and Lifetime Learning Education Tax Credits, exclusion or credit for adoption expenses, and Child and Dependent Care Credit.

What if your spouse owes back taxes? You will not be penalized by filing jointly, as long as you submit the Injured Spouse Allocation form, which is IRS Form 8379. The “injured spouse” on a jointly filed tax return files this form to get back his or her share of the joint refund when a joint overpayment is applied to a past-due obligation of the other spouse.

Work with your financial advisor and CPA to make sure the filing status you choose is appropriate for you and your spouse. Keep in mind that the status you choose this year might be different in future years, depending on what changes in your and your spouse’s life and work situation.

3. Create or update your estate planning documents

As noted in our previous estate planning blog post, most Americans have no formal estate plan in place to specify how they want their final wishes to be carried out upon passing. Everyone has an estate. Your estate is simply everything you own, including your bank accounts, your home, your vehicles, your furniture, your keepsakes and even your beloved pet.

The most important documents in as estate plan include: a will, durable powers of attorney, and guardianship designations.

Don’t forget to change or update any beneficiary designations on investment or retirement accounts. This is a common oversight by many younger couples, but an important point to review and complete.

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Getting on the same page with your spouse about finances isn’t a romantic topic, but it is a key element in avoiding disagreements and resentment that can erode the trust in your relationship. Many couples find it beneficial to discuss their financial goals with their financial advisor rather than doing it on their own. We are here to help you have those tough but necessary conversations and to build a personal financial plan that will guide you into the future.

 

Any opinions are those of the author and not necessarily those of Raymond James. This material is being provided for informational purposes only and is not a complete description, nor is it a recommendation. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Investing involves risk and you may incur a profit or a loss regardless of strategy selected. No investment strategy can guarantee your objectives will be met. Past performance is no guarantee of future results. Prior to making an investment decision, please consult with your financial advisor about your individual situation.