Marriage: Pros and Cons

To marry or not to marry? This isn’t a decision to make on financial grounds, but the choice certainly has financial consequences.

My article in April about laws that provide financial incentives not to marry drew a great many comments. I address the points several readers made in this follow-up.

The example I cited from the federal tax code was for a high-earning couple. Yet tax laws for married couples don’t just affect the wealthy. Those with lower incomes can pay a tax penalty for marriage, as well.

The Earned Income Credit, intended to provide help for low-income taxpayers with young children, is one example. A single mom with modest earnings probably qualifies for a substantial credit. She could also file as a head of household to get a higher standard deduction ($9,100 for 2014, as opposed to $6,200 for a single taxpayer). If she remarried, she might lose part or all of the credit, and the joint standard deduction for her and her spouse would be $12,400.

Or suppose one of a couple had significant employee expenses or medical costs. These, together with mortgage interest, might add up to $14,000 in itemized deductions. As a married couple filing either jointly or separately, they have just $1,600 more than their standard deduction. If they were unmarried, one partner might be able to itemize the $14,000, while the other took the $6,200 standard deduction for a single person.

Remarriage might also make it harder for your kids to get into college. Students whose parents are divorced may be able to apply for financial aid based on just the custodial parent’s income. If that parent remarries, though, the stepparent’s income is likely to be considered also.

On the other side of the coin, there are many ways that state and federal laws do support marriage.

Social Security is one area that clearly favors marriage, as unmarried partners don’t qualify for survivor benefits. Minor children, however, can be eligible for survivor benefits even if the parents aren’t married. The application process is significantly more complicated, because it’s necessary to prove the deceased parent’s relationship to the child.

In other ways, unmarried partners are at a disadvantage. They don’t automatically inherit property, qualify for pension plans or retirement accounts, or have the right to make end-of-life decisions or authorize medical care.

For this reason, couples that opt not to marry need to take conscious action to deal with the financial aspects of their relationship. Wills are essential. So are medical powers of attorney. Partners should make careful and deliberate decisions about day-to-day money matters, like whether to have joint bank accounts or to own their home as joint tenants. They also need to consider whether to designate each other as beneficiaries on life insurance policies, pension plans and retirement accounts.

Couples who choose marriage shouldn’t ignore the financial consequences, either. Those in second marriages, for example, need to be sure their estate planning provides fairly for children of previous marriages.

Like so many other big life decisions, whether to get married is a choice best made with the heart rather than the head. Your beliefs about what is important and how you want to live certainly outweigh any financial or tax concerns.

Yet the money matters, too. Because our laws don’t always keep up with the changes in our culture, it’s up to you to make sure the financial side of any relationship is what you and your partner want it to be. Taking responsibility for providing for yourself and your family includes making conscious financial decisions together.

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Rick Kahler, CFP, is president of Kahler Financial Group in Rapid City, S.D.

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