The Big Issue Couples Need to Talk About Before Getting Married

December 21st 2016

Willie Burnley Jr.

A lot of people decided to get married over the holidays. Fewer talk about their taxes, but it's a conversation every couple should eventually have.

In that spirit, ATTN: has reached out to experts who know exactly what to do for those couples figuring out if they should file their taxes jointly or separately. Their answer? Like whether two people should marry in the first place: it depends.

gay marriage

“If you have two people that make $150,000, then combined they’re going to stay at a pretty high tax bracket," Alison Sabran, a senior financial planner at EP Wealth Advisors, told ATTN:.

This is what some call the “marriage penalty”: when two, typically high-income individuals increase their tax burden by filing their taxes together.

But for most other people filing together while married makes more sense. Outside of a few cases, filing separately “doesn’t tend to be favorable.”

Only 4.3 percent of married couples filed separately in 2009, the last year for which such information is available, according to Turbo Tax.

“The government doesn’t really like married people filing separately and if you have entered into a marriage, they will reward you with greater tax benefits to file jointly,” Sabran said. She knows people who got married in order to save thousands of dollars on their taxes, months before having a ceremony.

There are some cases where filing separately is necessary.

“From a divorce planner perspective, if it’s an acrimonious separation or dissolution and you are worried about hiking up funds, or worried about misdoings with the money and/or tax evasion on your spouse’s part... then married filing separately becomes very appealing,” said Jennifer Failla, Divorce Analyst and Planner at Strada Wealth Management.

Filing separately would allow a partner to claim the “innocent spouse” defense, according to Failla, which would mean that an individual could claim they had no knowledge of any financial misdoings on the part of their spouse before a judge or the IRS.

What is a much more common problem for couples, according to Sabran, is viewing their assets as shared.

“It is an adjustment from looking at it as ‘my money and your money,’ or ‘you earned that and I earned this,’” she said, pointing out that couples should focus on what advantages they reap as a unit if they are going to get married.

One way to come to a financial understanding that is good for both parties is a prenuptial agreement. More than a safeguard for the wealthy, prenups can allow debt to remain with the individual that brought it into the union, or help someone with debt relief. Failla provided another example of how they can be used:

“We actually do a prenup in a way that builds account and wealth for the spouse that doesn’t have the acumen and the wealth to start. So I just did a $20 million prenup, for example, and the partner entering the marriage was still going to school and she didn’t have her degree or a lot of money. But we crafted the prenup in a way that, over the next 10 years, she will accumulate a quarter of a million dollars.”