Financial Planning Before The Wedding

Published on

Planning a wedding "is the first telltale sign of how the couple views money and the first scenario for there to be conflict," says Marshall, owner of the Wedding Coach in San Francisco.

"If they have a limited budget and a choice between upgrading their wine, their invitations or getting better centerpieces, that really helps them to prioritize. It forces them to have collaboration and a compromise," he says. It gives them "a taste of what's to come."

After seeing friends, relations and even some clients divorce, in large part over money, Marshall has been advising engaged couples to talk about things like budgeting and joint-versus-separate checking accounts before the big day. If they don't have a financial planner, he will refer them to one.

Martha Shaughnessy insisted on seeing a financial planner with her fiance before getting married in San Francisco this weekend. "We did not want to go into any debt for the wedding and we set up a really, really strict budget for ourselves," she says. The planner helped with that and longer-term spending issues.

"Like a lot of couples, his purchases tend to be less frequent but much bigger, while mine" are smaller but more often, she says. "We each had the impression the other spends a lot more money." With the help of a planner, she says, "we were able to talk about things that usually come in a stressful moment," before that moment arrived.

Credit Cards

Following are some tips to help newlyweds and soon-to-weds plan their financial futures. In Tuesday's column, I'll have more information focusing on assets and debts.

— Check each other's credit reports: If your betrothed can't manage debt, better find out before the wedding. Withholding this information from each other is like "financial infidelity," says John Ulzheimer, president of consumer education at SmartCreditcom.

You can get a free copy of your report from each of the three credit bureaus every 12 months at

Red flags that deserve serious discussion include large credit card balances, late payments, collection accounts and – worst of all – bankruptcies, foreclosures, court judgments and tax liens.

After marriage, you each will still have your own credit report showing accounts in your names. The credit reports will not be commingled unless by mistake, Ulzheimer says.

He urges couples who have credit cards coming into a marriage to keep them separate. If you add yourself as a co-signer or joint account hold to your spouse's credit card, you become legally responsible for that debt.

— Changing your name? Notify the Social Security Administration so your name will match your Social Security number on your next tax return. For instructions, see, call 800 772-1213 or visit a local office.

Tax-Filing Status

— Choose your new tax-filing status. If you are married at the end of the year, you will be considered married the whole year for tax purposes and you must file your federal and state returns as married filing jointly or married filing separately. Most couples file joint returns.

Filing separately rarely saves money unless one spouse has certain large deductions, such as for medical expenses or casualty losses. If you and your spouse file a joint return, you are each legally responsible for both of your taxes.

If you file separately, you are only liable for your share. If you think your spouse is a tax cheat or might flee the country, consider filing separately. Or better yet, call off the wedding.

In California, married same-sex couples and registered domestic partners can file a state tax return together, but they must file their federal tax return as two single people.

However, such couples must split their community property income on their federal tax return 50-50. Because of the differences in federal and state law, same-sex couples should consult an accountant.

Marriage Penalty

— See if you need to adjust your withholding. Getting hitched could push you into a higher tax bracket. In 2001 and 2003, Congress passed laws to reduce this so-called marriage penalty, but it still exists for higher-income couples.

If you are low- to middle-income and your salaries are in the same ballpark, your tax as a married couple will usually be close to what you paid as two single people.

If your two incomes are far apart, your tax liability could actually be lower after marriage. This is known as a marriage bonus.

But two spouses with higher incomes will still get hit with the marriage penalty, says Mark Luscombe, principal federal tax analyst with CCH.

For example, two single filers who each had $75,000 in taxable income after deductions and exemptions in 2011 would have owed $14,881 each or a total of $29,762 in federal tax. On a joint return, they would have owed $30,070 – or $308 more. That's not a big worry.

But if each spouse had $150,000 in taxable income, the marriage penalty would be more like $5,220 excluding the effect of alternative minimum tax, which is likely at this level.

If you expect your taxes to change considerably, file a new W-4 with your employer to adjust your withholding or, if self-employed, modify your estimated tax payments.

If you don't pay enough throughout the year, through withholding or estimated tax payments, you could be hit with an underpayment penalty if the amount due with your tax return is more than $1,000.

To estimate your combined tax bill, run the numbers using tax-preparation software or try the IRS withholding calculator at

Note: The laws reducing the marriage penalty expire after this year. Unless Congress renews them, more couples will get hit next year.

Tell your auto insurer you got married. Your rates might go down.

In California, insurers can use marital status as a rating factor, although it can't be one of the top three. "I have never seen rates go up after marriage, only down," says Doug Heller of Consumer Watchdog.

Insurance companies say couples get a discount because they are better risks than singles, but Heller thinks it's marketing driven. They hope you will bring in your spouse's auto policy and eventually purchase home and life insurance.

Health Plans

— Consider switching health plans. Normally you can only add or subtract a spouse from your group health plan at work once a year, during open enrollment. But if you get married, you have 30 days to add your spouse, and your spouse's children, to your group plan.

If your spouse is covered by another group plan, that employer may let him or her out of the plan midyear following a marriage, but is not required to. Most employers will allow this, says Kathy Bakich, a senior vice president with Segal Co.

Compare each other's coverage, doctor networks and out-of-pocket costs before switching.

If you have a flexible spending account, you also may be able to add your spouse so you can use it to pay for his or her medical expenses with pretax dollars.

In California, a state law requires all insurance policies regulated by the Department of Insurance to offer equal benefits to legally married same-sex couples and registered domestic partners that they offer opposite-sex couples, San Francisco attorney Deb Kinney says.

First of two columns on marriage and money. Look for the second part Tuesday at

Latest Videos

Latest Releases

In The News

Latest Report

Support Consumer Watchdog

Subscribe to our newsletter

To be updated with all the latest news, press releases and special reports.

More Releases