Finance: The Second Time Around
More Money Matters
Q: Are you responsible for your fiance's debt once you're married? A: "No. And don't assume it. I would encourage everyone to pay their debts off before they get into a marriage, except for the mortgage, if you're going to stay in that house. But credit cards, car loans -- get them paid off, if possible, so they're not an issue between the two of you. Do not cosign on any of your partner's old debts; creditors can come after you if they don't get paid. Be careful about opening joint credit-card accounts. You will be fully responsible for paying the entire debt if your husband can't swing it. If you have separate credit cards and your new husband racks up lots of charges, he alone will be responsible for paying and it shouldn't affect your credit rating. Also, make sure your credit cards with your former spouse have been canceled. Some people just hand them off to their ex without taking their name off the account, which means they're still responsible. "One of the largest debts is generally a mortgage. If you are moving into your spouse's home, I recommend that you do not add your name to the mortgage. You can agree that you will pay a portion of the mortgage payments, but you need to see those as a monthly expense, more like rent, because you won't be able to claim them in the event of a divorce. If you add your name to the mortgage and your new husband then decides he won't pay, you will be fully responsible. If you buy a new home together, most likely you will both sign on the mortgage, but do not put your name on the mortgage unless it's also on the title to the house."
Q: What else should couples do? A: "Look at your insurance needs. Both of you need medical insurance, so see which one of your employers offers a better program. Make sure the kids are covered, and determine who will pay for that. Make sure you have life insurance with the appropriate beneficiaries. Don't overlook disability insurance. Decide whether you're going to keep separate financial advisers, such as your CPA, which may be smart if your tax situation is complex. Otherwise, it will be easier for one CPA to give you the best advice, because he or she can see the entire picture. Ask your tax adviser if you should file joint or separate tax returns. One of the disadvantages of filing jointly is the 'marriage penalty.' Many people move into a higher tax bracket when they get married and combine incomes. The only way to know which is better is to have a pro forma, or practice, tax return prepared by your CPA. Keep in mind that if you file joint returns, you become liable for the information that is reported or not reported. If you or your husband have complicated returns, you may not want to take responsibility for the other's information."
This month's expert: Connie Brezik is a Certified Public Accountant and Personal Financial Specialist, and president of Asset Strategies, Inc., an investment-management and financial-planning firm with offices countrywide. She was interviewed by Janine Latus.