A growing number of Americans are choosing to live together rather than getting married, and this trend is particularly strong among older couples. According to the US Census Bureau in the United States, the number of couples over the age of 50 has doubled from 1.2 million in 2000 to 2.7 million in 2010.
Today, the decision is less dictated by social expectations than before. A lot of Americans now base their decision to marry, at least in part, on the financial implications of marriage, which can be substantial. This is a particularly important factor for older couples who have accumulated wealth and for whom raising their children together is no longer a significant concern.
Wedding bonus - or penalty
The spouses must declare their income taxes as spouses who file a joint declaration or have filed a marriage declaration separately from the year of their marriage. This can work for or against the total tax bill. For couples with significantly different incomes, especially when the spouse is not working, the joint deposit can reduce their tax liability due to much higher tax levels. Conversely, couples with similar incomes may find that their combined income drives them to a higher level, creating a much larger tax account than they should separate.
Exclusion rules for home sales
When you sell a home, a single taxpayer can exclude the first $250,000 of capital gains from tax. For couples with typical incomes, the first capital gains of $500,000 are excluded from tax, regardless of the amount of each spouse's contribution to the purchase of the property. To qualify for the $500,000 exclusion, the husband must own the home as a principal residence at least two years before the sale. Also, both spouses must have occupied the house of their primary residence for two years before, and neither spouse would be prevented from earning money by selling another home during the same period.
Social Security
Married couples have several options for benefiting from social security. A husband can choose to receive the benefits of his wife. The spousal allowance allows the spouse to receive up to 50% of the other spouse's benefits. This can be particularly useful for inactive spouses, people with limited work histories or low wages. The benefits of the husband can be obtained from 62 years. Also, when a spouse dies, the surviving spouse may receive the greater of both interests.
Qualified retirement plans
Spouses have more distribution and protection options than non-spouses in qualified pension plans. For defined benefit plans, the federal law requires a joint survivor pension, ensuring that the surviving spouse receives at least 50% of the annual amount paid during the member's lifetime, and is the only payment option proposed unless the plan member and his wife give their written consent for another form of payment. Also, in all eligible pension plans, the program participant's spouse must sign an exemption before being able to designate a principal beneficiary out of wedlock.
Unlimited wedding deduction
The Unlimited Marriage Deduction allows spouses to grant each other an unlimited number of assets throughout their life or death, without incurring inheritance or gift expenses. Unlike the annual subsidy exclusion amount of $ 15,000 and the cumulative exclusion amount of approximately $ 11.4 million in 2019, with the approval of the 2017 Tax Reduction Act and employment, there is no limit of the frequency the number of goods that the spouses can transfer to one another. This allows federal taxes to be deferred until the death of the surviving spouse, provided the assets are not left to unmarried beneficiaries.
Portability
Since 2011, surviving spouses can claim any or all unused exemptions by a deceased spouse. This exemption amount can be applied to your net worth tax. This "transferability" of the spouse's remaining savings can be a simple and effective way for a couple to reduce their property taxes.
Debt
The amount of the spouse's liability for debts incurred during the marriage varies from state to state. In community-owned states, like California, each spouse is fully responsible for all obligations created during the marriage, regardless of who supported them. In normal states, the spouse who has claimed the debt is usually only liable, unless it is a debt related to the necessities of life, such as food and shelter. In other words, marrying someone with bad credit can affect the borrowing power of a couple with proper credit.
Medical fees
In addition, the high costs of health care and long-term care have made marriage less attractive for many older couples. This type of debt is generally considered the responsibility of both spouses. Being married can also compromise a sick couple's eligibility for Medicaid benefits if the healthy couple has sufficient resources.
Loss of benefits
The new marriage may result in the loss of certain profits. If a surviving spouse who is entitled to the social security benefits of a deceased spouse is married before the age of 60, the spousal income benefit is void. An earlier pension may also be lost in the marriage. Some military services, including social security income, access to health services and necessary administrative privileges, may be lost in the event of a new marriage.
Determining if marriage is the right financial decision can be complicated. Your legal adviser can help you assess the impact of marriage on economic security and long-term goals.
John Pournaras Agency