Money and matrimony

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(MoneyWatch) Engaged couples have a lot to think about -- and a lot to do in preparation for their wedding. But after the ceremony, the reception, the toasts and the romantic honeymoon, real life intrudes and decisions must be made.

Among these are important financial decisions, and though they may not hold a candle to recent memories of sunbathing, sipping cocktails and dining by candlelight on an isolated island in the Caribbean, they cannot be avoided. What follows are issues to be addressed by newlyweds when reality strikes.

Filing tax returns: Filing as a married couple is required in the first year in which the knot is tied. Even if the marriage takes place on the last day of the year, the IRS requires a couple to file as if married for the entire year. The most common route is to file joint income tax returns, but there may be good reasons to file returns as married but separate.

Filing separately may result in tax savings. This applies when one partner has his/her own significant deductible expenses for property or medical expenses relative to his/her income. This may allow one spouse to claim deductions that are otherwise disallowed when filing jointly.

Separate income tax returns may be called for in the event a spouse reports income and/or deductions that may raise a red flag. If you sign a joint tax return and enjoy a lifestyle enhanced by your spouse's maneuvers to avoid income taxes, you cannot plead innocent when the IRS comes calling. The "Married -- Separate" tax filing status is the best way to protect yourself from your spouse's potentially dangerous tax strategy.

Joint credit: Couples often have their own credit accounts before marriage. But exchanging rings does not automatically make a spouse responsible for the debts in her husband's name. If you open credit accounts in both spouses' names, each of you will have "joint and several liability" for these accounts. However, if your wife later incurs large debts through such accounts and then leaves you, you will be legally required to pay the entire amount owed.

Take an inventory of the credit cards you both hold. You may want to consider closing out unused cards and accounts. But it's a good idea to keep one credit card in each partner's individual name to preserve and continue to build an individual credit history.

Updating employee benefits: Under an employer's benefit plan, marriage qualifies as a "change in family status." This allows you to make new elections under employer-provided health and life insurance coverage. If each of you has coverage through an employer, use this opportunity to select the one that best meets both of your needs. This is also a time to consider upward revision of your life insurance policy, especially if one partner is financially dependent on the other.

Updating beneficiaries and estate plan: You'll probably want to update the beneficiary designations on retirement accounts, employer-provided benefits and life insurance policies. This is also a time to have a will drawn up or to update existing ones, especially if you plan to have children. It's also a wise move to write a living will and designate a health care agent, which allows you to clarify your intentions for end-of-life care and to name persons you wish to make these decisions.

Finally, if you choose to take the family name of your partner, you must notify Social Security, your motor vehicle authority (driver's license, title and registrations) and financial institutions (banks, mutual funds, insurances, brokerages). You should also update citizenship documents (passports and visas). For these reasons, many women find it more convenient to keep their maiden name.

  • Ray Martin

    View all articles by Ray Martin on CBS MoneyWatch»
    Ray Martin has been a practicing financial advisor since 1986, providing financial guidance and advice to individuals. He has appeared regularly as a contributor on the CBS Early Show, CBS NewsPath, as a columnist on CBS Moneywatch.com and on NBC-TV's morning newscast TODAY. He has also appeared on the Oprah Winfrey Show and is the author of two books.