Hey guys,
So I am a guy engaged to a lovely woman who is finishing up her master's degree. Here's the financial rundown:
Me:
house: at ~20% equity, just refinanced to 2.875% with no pmi, 145k principal left, monthly payment $1275 includes taxes & insurance (not paying extra right now in order to pump more into her student debt principal)
car: 1991 model needing the occasional repair 190k miles, fiance says her child (figuratively speaking; we don't have one yet) will NOT ride in it, so replacing it eventually; insurance is about $550/year; taxes $26/year
monthly income after taxes, 401k contribution (maxed): $6200
no student debt
Her:
condo: maybe 10% equity, arm at maybe 4.875% (not sure of her exact terms) ~75k principal left, currently renting it out for slightly less than her monthly payment of ~700
car: volvo maybe 10 years old, reliable, don't know what she pays/year for insurance, no other payments
income: none right now or for the past two years, but in July she starts in same field as me, will be at ~ $5300/month after 401k & taxes
120k student debt (a good chunk of which is at ~8%)
We are definitely getting married (you know ceremony, reception, all that) the question we (mostly me, but she is humoring me so far) have been puzzling over is whether or not to get
Legally married. I have been reading a lot about taxes and benefits relating to the legal status of marriage and I am so far falling out on the side of not getting married legally. We are in a lucky enough situation where we will both make nice incomes, and that puts us in the "marriage penalty" territory. Here are some sources that I have read for information on law revolving around marriage:
http://www.gao.gov/products/GAO-04-353Rhttp://www.gao.gov/products/OGC-97-16http://www.gao.gov/products/GGD-96-175What I am afraid of is if there is some huge benefit that I am missing, so I wanted feedback from you guys on my current understanding of some of these factors and anything I leave out. Here's the main points of my understanding:
My tentative plan tax-wise is to stay unmarried and file seperately, which will save us around $900/year right now (that alone would not be enough to warrant this question though). The main factor is that we plan on having kids and once that happens, I will file as HOH and write off daycare costs etc. which runs into a few thousand in savings each year.
We will plan on getting legal documents to establish power of attorney (hospital visitation and medical decisions), wills, make each other beneficiaries for retirement and other accounts, umbrella policies, and life insurance policies. Speaking of insurance, we would both have health plans available to us through our place of employment, which also extends insurance to "partner" if in any event one of us stopped working.
We will pay off her loans aggressively, I gave her 13k at the end of last year and will again this year and next as "gifts" (spouses can transfer unlimited amounts of money, technically if I gave her more than 13k, she would have to report the amount over it as income)
Social security benefits don't seem to be a big factor, the benefit of receiving a spouse's social security benefit instead of your own seems predicated on the fact that one spouse had significantly higher contributions to social security over their career, which will not be the case for us. We will both have similar social security benefits. In any case, neither of us will rely on social security in any way to fund our retirement. I'm not very knowledgeable on social security, is it correct to say that there are no means testing to receive it? Like, do well-off people still get social security checks when they hit the age where they can receive it?
Estate taxes are another potentially big factor. Currently, the federal exclusion is up to $5,000,000 that any person can leave for any other person (some states have their own estate taxes, the state I'm in has an exclusion that also goes up to 5 million). Spouses can transfer unlimited assets after death tax-free. My take on this is that we have nowhere near 5 million in assets so this is not a factor in the near future. Hopefully someday, we will approach these numbers and at that point, for estate taxes alone, legal marriage would be a good idea in order to preserve assets for ourselves and our kids. My source:
http://www.irs.gov/instructions/i706/ch01.htmlThere are a lot of smaller categories that affect legal marriage status, but most don't apply to us (being able to offset capital gains with the capital losses of your spouse, payments to spouse after on the job death/injury of railroad workers, SSI)
The other thing is that at any point we decide to go get married, it is pretty easy, we don't have to do it the same day as our ceremony. I would like to be fully informed of the legal aspects of marriage, I don't want to do it just because thats the way everyone else does it. We are not in the middle of the bell curve for income, so I see our situation as fairly unique.
Also, we have spoken to a financial advisor, lawyer, and accountant about this very issue, and are pending reports from the accountant and financial advisor. But after having spoken with them, I was surprised that none seemed to have much experience with the financial/legal aspects of unmarried couples when compared to married couples. We may need to find people that deal with same-sex couples on a regular basis (even though we are heterosexual) and are more familiar with these types of questions.
What do you guys think?
[Edit] wanted to post a couple resources I found today for anyone who stumbles on this topic:
http://www.unmarried.org - a website that lists resources dealing with this issue
http://www.nolo.com/products/living-together-ltk.html - this book seems to be very thorough and well put-together, just started reading it