Getting married changes your financial life in profound ways. It’s not just that you’re living together or sharing expenses—you don’t need marriage to do that. It’s that your legal and tax statuses change. Furthermore, even though your credit score is unique, your spouse’s financial input may influence the decisions you make in the future.
It’s a good idea to have a conversation about these matters and make some financial plans with your partner well in advance of the wedding, whether you’re getting married for the first time or remarrying after a divorce or death. Granted, it’s not the most thrilling premarital activity. Whether you decide to fully integrate your finances or keep some things apart, the financial decisions you and your future spouse make will affect you both in the long run, both as individuals and as a couple.
Your choices will have not only financial implications but also emotional and legal ones. A little preparation now will pay off handsomely later.
No, you don’t inherit your spouse’s debt when you get married. However, there are a few exceptions to this rule, and it’s important to understand how your state’s laws could affect you.
What You Need to Know About Debt and Marriage
Here’s a breakdown of how debt works in different situations:
Before Marriage:
- Debts incurred before marriage are the responsibility of the individual who took them out. This includes student loans, credit card debt, medical bills, and auto loans.
- If you cosign a loan for your significant other or open a joint account on a credit card before you get married, you are both responsible for the debt after your marriage date.
After Marriage:
- In community property states, any debts you or your spouse accrue after getting married are considered joint debts. This means you are both responsible for repaying them, even if only one of you took out the loan.
- In common law states, you are only responsible for debts that you take out jointly with your spouse. This includes debts for things like groceries, rent, and utilities.
Exceptions:
- If you live in a community property state and your spouse defaults on a debt, you may be held responsible for the entire debt, even if you didn’t cosign for it.
- If you live in a common law state and your spouse defaults on a debt, you may be held responsible for the debt if it was used for a “family purpose,” such as groceries or rent.
How to Protect Yourself from Your Spouse’s Debt
There are a few things you can do to protect yourself from your spouse’s debt:
- Get a prenuptial agreement. This is a legal document that can specify which debts are yours and which are your spouse’s.
- Keep your finances separate. This means having separate bank accounts and credit cards.
- Be aware of your spouse’s credit score and debt history. You can check their credit report for free once a year at AnnualCreditReport.com.
- Talk to your spouse about their debt and how they plan to pay it off.
What to Do If You’re Already Married and Worried About Your Spouse’s Debt
If you’re already married and worried about your spouse’s debt, there are a few things you can do:
- Talk to your spouse about their debt. The first step is to have an open and honest conversation about their debt.
- Create a budget together. This will help you track your income and expenses and make a plan to pay off your debt.
- Consider debt consolidation or refinancing. This can help you lower your interest rate and make your payments more affordable.
- Seek professional help. If you’re struggling to manage your debt, a financial advisor or credit counselor can help you create a plan to get back on track.
Life Insurance: A Safety Net for You and Your Spouse
Having a life insurance policy in place can provide financial protection for you and your spouse. The lump sum payout of the death benefit, usually tax-free, can help the surviving spouse pay off any remaining debts and stay secure if one of you passes away.
It’s easier than you think to get peace of mind by purchasing a term life insurance policy from Haven Life. It’s a simple affordable way to make sure your family has financial protection should something happen to one of you.
Start by getting a free life insurance quote today.
Disclaimer:
This information is for educational purposes only and should not be considered financial advice. Please consult with a financial advisor for personalized advice.
Additional Resources:
- Haven Life: https://havenlife.com/
- Investopedia: https://www.investopedia.com/
- AnnualCreditReport.com: https://www.annualcreditreport.com/
- debt
- marriage
- community property
- common law
- prenuptial agreement
- credit score
- life insurance
FAQs:
- Can I be held responsible for my spouse’s debt?
- What can I do to protect myself from my spouse’s debt?
- What should I do if I’m already married and worried about my spouse’s debt?
- How can life insurance help me and my spouse?
Marriage and Taxes
Married couples can file joint or separate tax returns. Making the decision of how to file to pay the least amount of taxes can be made easier by using tax software to run both scenarios. Filing jointly is often the way to go for financial reasons, but each couple’s circumstances are unique.
If one spouse wants to maintain total separation from the other spouse’s business, for example, or if they don’t want to be accountable for each other’s returns’ accuracy and completeness, a couple may choose to file separately. In certain cases, it may be more cost-effective to file separately due to medical deductions for one spouse if that spouse makes substantially less money than their partner. On the other hand, certain deductions and exemptions are only available to couples who file jointly.
Choosing to file joint or separate tax returns can have an impact on the amount of student loan payments if one or both spouses have student loans. When filing a joint tax return, both spouses’ incomes are used to determine student loan payments for borrowers on income-based repayment plans. This could result in a higher payment than if they file separately. However, the operative word here is “potentially”—it hinges on the specific repayment plan, the disparity in income between the spouses, the amount of debt each spouse has from their student loans, the variation in taxes due based on filing status, and other elements.
The unlimited marital deduction, which allows married couples to transfer an unlimited amount of assets between them during their lives and after their deaths without having to pay gift or estate taxes, is one tax benefit of marriage.
Who Pays?
Traditionally, the father of the bride pays for the entire wedding. However, occasionally there isn’t a father, sometimes there isn’t a bride, and occasionally neither of the engaged couple’s families can afford to pay for the wedding. When paying for the wedding together, especially as a young couple with limited savings and many unfulfilled expectations, it’s critical to create and stick to a reasonable wedding budget.
Even if you stick to your budget, be aware of how expensive they can be. Nine out of ten respondents to a 2021 Brides and Investopedia survey stated they had postponed at least one important financial goal, such as beginning a family, saving for a house, or saving for retirement, in order to pay for their wedding.
Sticking to a wedding budget can be harder than it sounds. It’s possible that the wonderful wedding you’ve imagined will cost twice or even three times as much as you had anticipated or could afford once you start looking up wedding prices and speaking with vendors. After that, you have to decide whether to take on more debt, lower your goals, or use your creativity—or a combination of all three. Is a Saturday wedding really necessary? Do you really need 300 guests? If you’re artistic, is it possible to make your own centerpieces rather than purchasing them?