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  • Avoiding legal marriage?

    Not a women's issue per se but with female physicians and a partner that makes a comparable income - how many of you have thought about NOT getting legally married. I really don't see the benefits and if anything there are many penalties - marriage tax penalty, getting phased out of certain deductions, possible AMT, and in the event of a divorce losing possibly half of your assets and owing alimony.

    I don't see that not getting legally married affects commitment - since people get divorced anyway. One can still have an actual wedding and vows, no one will be the wiser. You can still buy property and have both names on the deed and on the mortgage.

    I know a few high earning couples that are not legally married for the reasons above, and plan on getting married once they retire. Sure, it can backfire and someone can die and you won't get their Social Security, but will you really need it anyway? It's not much.

    Curious if anyone else has thought about this, I am seriously considering not getting legally married, as it would bump us both up to the next tax bracket and phase aside a certain deductions.

    Seems like a lot of the posters here, and I mean no disrespect, have stay at home wife's which are not as or affected by this.

  • #2
    There was a similar discussion on another professional forum recently. In summary, someone asked if it was an good idea to "paper divorce" in order to obtain similar financial benefits you mentioned above.  Needless to say, it generated many comments; some pragmatic, some emotional. There was one comment that someone posted which did stick out. In summary, comment stated that if you are not married, your partner would not be your next of kin in any situation. In the event of any medical decision making or end of life issues, he/she would not have priority. Of course, you can write a will or advanced directive and address that issue, but I think the fact that one is legally someone's spouse makes it clear and simple.  I thought about that comment and about the chance that I or my spouse would ever be in that situation.  And if we were, I 100% would want my spouse to be the one making those final choices for me and vise versa.  I would never forgive myself if the only reason I wouldn't be the one calling the shots for my spouse, and instead it would be my in laws making them, is because I was too unwilling to let go of some money.

    Personally, I married my spouse when we were both dirt poor. Through our years together (18 years), there were years where Wife made more money and then there were similar length of time where Husband out earned the wife significantly.  Then, there are years where we made about equal amounts.  I truly believe in my marriage, and I believe that my spouse married me irrelevant to what I actually brought home in terms of dollar amount.  To be perfectly honest, in any dual profession marriage (each has an advanced degree/ skills) and where both partners contribute earnestly to the union, both partners can have high earning potential (potential being key word). What actually happens may vary.

    I don't have any actual advice for you and I am not passing judgement on what you and your partner decide to do. But I can say as someone who is in a dual profession and dual income marriage, both of us are willing to forgo that monetarily benefit for the sake of being legally attached to each other.  Maybe it was because we were young, naive and didn't know better when we sign the marriage certificate. Who knows? But I wouldn't change a thing (going on 12 years of marriage).

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    • #3
      I totally understand what you are saying conniebird.  For the high net worth female marriage is a mixed picture.  I definitely pay more tax after marriage.  I think you might want to do it because you want a child.  I think calling yourself wife or husband if the spouse is in a life or death situation would allow you to make decisions.  Who checks for the marriage license?

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      • #4
        I'm an attending so the financial aspect is real. For the above and other reasons I stand to lose over 20k a year by getting married. Not small change when I'm trying to pick away at loans. I want them paid off in 5 years but might take longer. My partner has been married before and lost a TON of money in the divorce. He's actually ok with whatever I'm comfortable with. Not saying we will never get married legally - but we may defer it until I'm more caught up financially. I'm an older new attending and way behind in retirement savings along with a high students loan burden. We plan on having a wedding next year.

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        • #5
          We're not married, so at least one poster on here doesn't have a stay-at-home wife!

          I never ran the finances (e.g. taxes, insurance premiums (her health insurance is better, my car/property insurance is way better)), but I'm sure it's immaterial when factoring in a potential 50% loss.  If both of you have high incomes/assets, it is probably less of an issue.  Perhaps a prenup would be in order either way?  I have always understood that the court takes a dim view of asset protection by not getting a marriage license when in fact you present yourself to the world as married.

          As mentioned above, the whole next of kin thing can be taken care of with some planning.  I worried about international travel with child when not married and different last names, getting hassled by border agents--this has been a nonissue.  I still worry about Social Security death benefits in the event of unexpected death--yes, it's not a ton of money, but it is better than a stick in the eye.

          Good luck!

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          • #6
            Different circumstances, but I will say that student loans/REPAYE is one of the reasons we are delaying (I guess it's 'avoiding', at least for the moment) legal marriage.

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            • #7
              I got married young, so marriage has always been an emotional commitment in my mind, not a financial one (given we were in college and had nothing to our names when we got married!). I really have no idea how I'd approach it if I were older. . . Seems like if you have a child, it would be easier to just be married? But I really have no idea here. Good luck figuring out what will be best for the two of you.

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              • #8
                Emotional answers will vary -- religion, societal normal, and tradition factor in.

                Evidence based answers-

                - advantage for "legal marriage"

                *social security benefits

                *ability to do a stretch IRA if a partner dies or use IRA for medical costs or education should the need arise (you plan so shouldn't)

                *health insurance, it's cheaper for me to have a family plan including husband and kids than me family plan for kids and him individual plan

                *if you have a HSA you can use your $ for your spouse.

                *auto insurance, married is often (not always) cheaper and then you may qualify for multipolicy discounts

                - advantage for being "legally single"

                * federal tax code has increased rates for couples earning >$169k

                *I suppose you could each have a dependent care account to use pre-tax $ for daycare (limited to when kids are younger really)

                 

                -------------that's all I could come up with, since many things don't matter for you (or me), like our ability to qualify for a loan w/o a husband.  In the end the decision is a personal one.  But I don't know how to exactly quantify the marriage discounts, so I can't compare that to the tax advantage easily.

                 

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                • #9
                  Well thought-out list, drcolleen. Here are a couple more on the estate planning spectrum:

                  • The ability for spouses to make unlimited gifts to each other.

                  • Portability for estate taxes (can add whatever is not used by the first spouse to die to your lifetime exclusion).


                  Wonder if anyone can come up with more benefits.
                  Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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                  • #10
                    As a doctor's wife this is a pretty relevant topic for me.  At any substantial amount of income, the marriage penalty starts to hit pretty hard.  Paying more income tax simply because you're married is at best antiquated and in reality sexist and absolutely ridiculous.   :x

                    I've explored the possibility of a judicial divorce to avoid the marriage penalty but so far the cons outweigh the pros.  We would still be married under the church, and therefore still each other's husband and wife, but legally speaking we would be unmarried, and getting there would be a huge PITA, be a really, really poor topic of conversation and go over like a lead balloon with family and my spouse herself.

                    You can solve most of the financial and medical decision issues, estate planning, etc. with documentation, directives, wills, powers of attorney and whatnot, but it's a huge hassle when it comes to things like community property rights (in applicable states) which virtually vanish.  And then the warm and fuzzies of being married is chilled when it goes to having a child who, in many states, will not be automatically filiated to the father and may even legally be called a ******************************************.

                    The biggest cost and time sink/stressor will be the divorce itself.  At a minimum you're going to have to get paperwork drafted.  You very well might have to appear in court, may or may not have to deal with mandatory alimony or child support hearings, etc., even if it's a tax-purpose divorce.  And then if anybody runs a search and finds your names on the record as being divorced, it could also cause them to jump to big conclusions about the status of your relationship.  And finally, the discussion about any of this with your spouse is going to be terribly unsexy.  Frankly, I don't ever want my wife to ever think of the word "divorce."   :P

                    If I was the doc making a large income and dating, there would really be no motivation personally to be married unless I was planning to have kids soon.  Especially if I was in some sort of student loan payment plan which factored both spouses income.  However, if you're looking at a low-income/stay-at-home/frivolous job prospect, then you do get a pretty decent tax break for being married.

                    Commitment wise IMO you're fooling yourself if you think there is no change in commitment.  For lifelong partners who love and trust each other implicitly forever and ever, sure, but for the rest of everyone else, you're no longer legally married, and there are zero consequences for walking away.  For better or worse, the prospect of going through a divorce is enough to keep some spouses together.  Further, there is no legal penalty for infidelity (or even going out and marrying another person) while you are not legally married.

                    So moral of my thoughts is that we're going to just suck it up and bend over and take the tax hit like we do anything else tax wise, and hope that one day we get a president/congress that does away with the marriage penalty once and for all.

                     

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                    • #11




                      Emotional answers will vary — religion, societal normal, and tradition factor in.

                      Evidence based answers-

                      – advantage for “legal marriage”

                      *social security benefits

                      *ability to do a stretch IRA if a partner dies or use IRA for medical costs or education should the need arise (you plan so shouldn’t)

                      *health insurance, it’s cheaper for me to have a family plan including husband and kids than me family plan for kids and him individual plan

                      *if you have a HSA you can use your $ for your spouse.

                      *auto insurance, married is often (not always) cheaper and then you may qualify for multipolicy discounts

                      – advantage for being “legally single”

                      * federal tax code has increased rates for couples earning >$169k

                      *I suppose you could each have a dependent care account to use pre-tax $ for daycare (limited to when kids are younger really)

                       

                      ————-that’s all I could come up with, since many things don’t matter for you (or me), like our ability to qualify for a loan w/o a husband.  In the end the decision is a personal one.  But I don’t know how to exactly quantify the marriage discounts, so I can’t compare that to the tax advantage easily.

                       
                      Click to expand...


                      Theoretically if it's two docs/high income professionals, you will both:

                      1) Have the maximum, or very similar Social Security benefits (************************, maybe each of you could marry a friend and give out spousal benefits)

                      2) Both have some subsidized health insurance through your respective employers.

                      3) Possibly be eligible for your own HSA with an equivalent total amount (but like you said, might not each be able to tap into the other's).

                      4) Each be able to qualify for your own loans on your separate incomes.

                      And IMO the auto insurance discount isn't really worth mentioning.  Not sure if you get a similar discount on life insurance or not, might be a few bucks a month.

                      A couple of other benefits off the top of my head is that in many states, being single might qualify you for two homestead exemptions whereas a married couple may only be allowed one.  And then as others have mentioned, many student loan payment plans look at total married income.

                      Comment


                      • #12




                        Well thought-out list, drcolleen. Here are a couple more on the estate planning spectrum:

                        • The ability for spouses to make unlimited gifts to each other.

                        • Portability for estate taxes (can add whatever is not used by the first spouse to die to your lifetime exclusion).


                        Wonder if anyone can come up with more benefits.
                        Click to expand...


                        For big estates this is pretty real.  Theoretically though on a big enough estate the first non-spouse will be wiping out his whole estate & GSTT amounts and not have anything left.  But you would lose the ability to QTIP the rest, and the surviving non-spouse would be looking at facing a hefty estate tax paid during her/his life which could otherwise be avoided.

                        Practically speaking, for two high income professionals there shouldn't ever be any need for explicit gifting, and even for disparate individuals you can shower a lot of benefits on a girlfriend/boyfriend without it being a taxable event, but you could run into an issue transferring large amounts of assets from one to the other.  And then for smaller estates you'd have to give quite a lot to your boyfriend/girlfriend before you'd ever owe any gift tax with the current exemption amounts.

                        Thinking some more, other benefits...

                        The social security benefit is nothing to laugh at, over $30k/year.  Again two high income professionals will each have his/her own benefit but for disparate couples this is a nice thing to have fall from the sky every month.

                        Can you get a second-to-die insurance policy or lifetime annuity on two non married people?  That might be a thing for what that's worth.

                        State/military retirement benefits, pensions, healthcare, whatnot.

                        Biggest benefit far and away is for spouses who don't work or make substantially less in community property states.

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                        • #13
                          I have a friend who is a doc - she has been dating the same guy for 10 years.  They have 2 kids.  He decided to be the stay-at-home parent a few years ago.  Now she's running into problems because he doesn't earn a (taxable) income and she can't legally contribute to IRAs for him since they're not legally married.  They are probably going to get legally married soon for that and other reasons - it's getting just more complicated the longer they're together.

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                          • #14
                            When the bickering starts, the legal document might be the only sticky bond holding   you together.  Ask yourself if cohab and legal marriage are equal bonds and commitments.

                            Being married,  I estimate that my husband and I pay an extra $25k-$30k annually in income  taxes.

                            We've created trusts, which ( as I understand) eliminates  the estate tax benefits. Can a nonmarried couple create a trust?

                            We are married 34 years;  that's the only upside.

                             

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                            • #15


                              Now she’s running into problems because he doesn’t earn a (taxable) income and she can’t legally contribute to IRAs for him since they’re not legally married.
                              Click to expand...


                              Spousal IRAs - another one for the list!
                              Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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