On a more serious note, today we are talking about other things you should remember in the process of joining two families. You might be completely overwhelmed by wedding preparations, but it's also important to consider your financial and legal marriages. I'm sure you've heard that when you get married, you are not just marrying the person, you also getting married to habits, desires and traits picked up from family. Some financial habits are deal breakers (for example consistently abusing money) while others may just be minor inconveneniences.
I prepared this checklist for my friend before she got married in 2005. I hope you find it helpful. Contact me at editor@fabnaija.com if you need more detailed information or legal assistance with preparing documents or structuring your finances.
Name & Address Change (if applicable)
- change address with post office
- file SS-5 form with Social Security Administration for official name change
- www.ssa.gov / 1800 772 – 1213 begin_of_the_skype_highlighting 1800 772 – 1213 end_of_the_skype_highlighting
- change name and address with company's human resources
- file From 8882 with IRS for change of address
- changing with the Post office is usually sufficient for the IRS change, but don't take chances
- if you are busy, think about whether you should change your name right away. (if you change it in one place, you really need to change it in others to avoid any confusion. If you don't have time to do all this, then leave it for now)
Filing Taxes
- Should you file Jointly or Separately?
- It is not always beneficial to file jointly when you are married
- Depends on how much more you have to itemize as a married couple
- The easiest way to know which is more favorable is to do a rough calculation of either type of filing and see which one saves the most taxes
Disability Insurance
- make sure you have enough
- you don't want to overburden your spouse's income if you are unable to work for a while
- some recommend 75 – 80% of your current income
- long term disability insurance is very important
- don't take unnecessary risks; get enough
Life Insurance
- may not be necessary till you have kids, if there is no one you are financially responsible for now
- review any plans you had before marriage to ensure that you have the right beneficiary ie don't forget to the change it to your spouse and children if that's what you want
- consider who should really be a beneficiary on your life insurance policy. You may want to include your parents (if they are dependent on your for their finances)
- make sure you have enough life insurance for final expenses (funeral etc)
- consider funding an irrevocable trust with your life insurance policy (discussed under irrevocable trust below)
- Get a Durable Power of Attorney: document designates the person who can make certain health decisions when you can't (usually your spouse, but does not have to be)
- Determine whether the person has a good grasp of what you would like
- Make sure the person is assertive because people may have a different opinion
- Make sure the document states what constitutes a terminal illness
- Will
- For very interesting tax reasons, you need separate wills.
- File a copy with your bank. Make sure you follow the rules for will creation in your state
Children
- College fund is the main thing to remember (open as soon as possible)
- Contribution to college fund is tax free up to the annual gift tax exclusion ($11,000 in 2005 and indexed for inflation)
- You can set this up in most banks
- consider separate savings account for children
- it encourages them to save and they can use the money for something other than education
- I don't believe the contribution to this account is tax free
- Consider using the donations the kids receive from visitors when they are born to start this account (be a good parent, do not spend the money)
- Irrevocable Trust
- You may want to consider creating an irrevocable trust for your children
- It's irrevocable so you won't have access to the money
- You may also make your life insurance the property of the trust
- This way, when you die, all the money they would have received under the life insurance policy goes to the trust
- This is a good idea because the trust will have a trustee that will ensure that the money is used carefully by the children if they are young
- Remember to have someone other than your spouse listed as a secondary trustee in the unlikely and sad event that you both die at the same time
- if you create a trust or Will be sure to list all your children. Preferably just list "children" instead of listing the names of your children because you may forget to update it when you have a new kid
- Considering how expensive weddings are, you may want to create an irrevocable trust for your kids' weddings
Retirement
- Note that retirement accounts are owned individually. Use work retirement plans as much as possible. Do not depend on your spouse's retirement fund (big mistake)
- Consider IRAs
- Contribute to 401K or 403(b) plan. Contribution is tax-free and growth is tax deferred. 401ks have been getting special attention in today's economy. Talk to your financial advisor about your particular situation or contact us at editors@fabnaija.com for our recommended advisor.
- review the beneficiary on retirement accounts ( make sure you have the right name)
- you may need to elect survivor benefits on your company's retirement plan (check)
- Ask yourself how much you can live on each year.
- When you decide, use the calculator on the following website to determine if you are saving enough to reach your goal retirement income:
- http/Newlywedfinances.com/retire_calc/index.html
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