Financial Planning
Your financial goals may include both saving for retirement and saving for a specific purpose. Some investments can be long-term. Others perhaps need to be more liquid. For example, newly married couples may want to save aggressively for a home. If both work, one strategy might be to live off of one salary and save the other.
Joint income could put a household into a higher tax bracket, which places greater emphasis on means of deferring taxes on this income. There are a number of Individual Retirement Account (IRA) options. Depending on a household’s adjusted gross income, these contributions may be tax deductible. IRA earnings grow tax-deferred until proceeds are drawn out later in life. However, with the exception of an IRA to fund a child’s college education, there is a hefty penalty for IRA withdrawals before age 59 ½.
How To Prepare Financially For A First Marriage
For the young, newly married couple, the areas of financial concern that will need to be addressed are: (1) life insurance, (2) form of property ownership, and (3) money management.
Life Insurance
When it comes to insurance needs, the basic rule is that you need enough coverage to sustain your family’s present income level should you die. If you are the only breadwinner, or if you plan on starting a family soon, then you will need to purchase life insurance.
Property Ownership
If you intend to own a residence or other property, or if you and your spouse already own property together, you will need to consider the best way for you to hold that property. Will the property be held solely by one spouse? By both spouses jointly? Because of the complex legal implications of the various forms of property ownership, you should seek legal advice about this issue.
Money Management
It is important to consider carefully how your day-to-day finances will be handled. The new couple should discuss financial goals, resolve differences, and establish a budget and/or saving and investment plan. Will you have joint bank accounts, separate accounts, or both? How much do you want to spend on vacations? On monthly food bills? Entertainment? Gifts? What are your long-term financial goals? Do you have a financial plan, even an informal one?
If you don't have a financial plan, now is the time to prepare one. Even if you do have a plan, your changed marital status suggests that you review it.
How To Prepare Financially For Re-Marriage
When considering remarriage, it is important to plan for the following:
Whether property acquired before the marriage will be held jointly; How to provide for children from a previous marriage; and Whether a prenuptial agreement is necessary to accomplish goals related to either of these issues.
If either spouse has significant assets, it will be necessary to consult an attorney.
As for the estate planning aspects of providing for children from a previous marriage, trusts and/or life insurance are the vehicles most often used.
Tip: Be sure to update your will before you remarry to ensure that your assets will be divided among your heirs after your death in the manner and proportions you desire.
© CPA SiteSolutions