Have you recently been married, gotten divorced, or lost a spouse? During eventful times of major life changes, it's easy to overlook all of the economic details. A change in marital status should prompt a review of your financial and tax matters. Here are a few suggestions to get you started.
Insurance coverage. When your marital status changes, review all of your insurance policies. Combining separately held insurance policies with a spouse can result in savings and discounts for home, auto, or health insurance. Most group health insurance policies allow spousal coverage, so you may want to opt for coverage under your partner's policy if superior or less expensive coverage is offered.
Married couples are often considered a better insurance risk, so together you may qualify for a lower rate. Also evaluate your need for disability or long-term care insurance.
Beneficiary designations. When you established your insurance policies and financial accounts, you made choices about who would be your beneficiary on each one. After a change in martial status, it's time to review your beneficiary designations on all financial accounts including life insurance policies and retirement accounts.
Estate planning. Now is a good time to update any choices that have become obsolete in your important legal documents. Incomplete paperwork or inappropriate choices could mean your intended beneficiary may not end up with your assets. You should periodically review and update your existing will and other estate planning documents to ensure that they reflect your current situation. Before getting married, consider a prenuptial agreement if there are children from a prior marriage or if you own substantial assets.
Tax planning. Your tax liability will likely change when you marry, divorce, or lose a spouse. Newlyweds may face higher income taxes due to the "marriage penalty" which is the higher tax rate for some partners earning income versus two single people with the same individual incomes. When there is any change to your martial status, you will probably need to adjust your income tax withholding or estimated tax payments. Call us for advice on the optimal selections for your tax situation.
Legal documents. Review any other pertinent personal or business documents. If you change or hyphenate your last name, notify the Social Security Administration and Department of Motor Vehicles of your name change. Make digital and paper copies of your estate documents, marriage license, or final divorce decree - and keep the originals in a safe place.
If you need financial or tax guidance on your change in martial status, contact our office for advice.