If you have been keeping up with the CCM newsletter lately, you may have noticed a record number of our colleagues have gotten married in the past 18 months, myself included. And if you or a recently married friend or family member are anything like me, you made a financial planning checklist immediately upon returning from the honeymoon.
All joking aside, there are many aspects around one’s financial life that can change after marriage, some of which are time sensitive. Below is a checklist for some of the action items to think about after marriage and the financial planning “why” behind them. We invite you to share this with friends and loved ones who will benefit from it.
- W-4 Your tax filing status is dependent on your marital status on the last day of the tax year (December 31). As such, it is important to notify your employer of a change in filing status to ensure the amount withheld from your paycheck is in alignment.
- CONTACT INFORMATION When you go through a name change, address change, or both, you will want to update this with your employer, financial institutions, and insurance companies. It is important to keep a copy of your marriage certificate on hand, as many institutions require this to change the name on record.
- BENEFICIARY DESIGNATIONS Review and update your beneficiary designations, including your employer-sponsored retirement plan, life insurance policies, bank and investment accounts, and individual retirement accounts
- ANALYZE EMPLOYER-PROVIDED BENEFITS Marriage is a qualifying event for employer-provided benefits, allowing you to make changes outside of open enrollment. This includes employer-provided health plans, disability insurance, and life insurance. A cost-benefit analysis of health care plans and the specific in-network providers, prescription costs, and Health Savings Account (HSA) eligibility should be considered. Additionally, it may be wise to look at some ancillary benefits, such as legal assistance. Some employers provide this as a benefit, which can reduce the cost of legal fees for updating your estate documents.
- ESTATE DOCUMENTS It’s an opportune time to create or update wills, trusts, health care directives, and power of attorney documents. While some people will avoid this as it can be an unpleasant topic to think about, it is important to consider the toll on the surviving spouse if the documents don’t exist or if they aren’t current. Health care directives and power of attorney documents can help with medical situations, incapacity, and even ordinary transactions. It is important not only to have the documents, but to review the roles each spouse holds, such as trustee, agent, attorney-in-fact, or personal representative.
- DEEDS Now is a perfect time to review the titling of property ownership and either title jointly or place transfer on death deeds on properties.
- CREATE A BUDGET Whether you use a spreadsheet or data aggregation budgeting tools like Mint or Personal Capital, it is important to determine your household cash flow and develop a strategy to allocate any surplus toward items such as:
- Establishing an Emergency Fund This is typically held in a bank account to maintain liquidity and is ideally equal to around 3-6 months of fixed expenses.
- Pay Down High Interest Debt Personal debt (credit cards, car loans) and student loan debt may fall under this category.
- Optimize Employer-sponsored Retirement Plans At a minimum, this means contributing to the matching amount up to the IRS limits ($20,500 in 2022 for defined contribution plans) if cash flow allows.
- Contribute to Other Tax Preferential Accounts This includes contributing to Roth IRA and Health Savings Accounts.
- CONSIDER LIFE AND DISABILITY INSURANCE There are several options in this category, including group coverage, permanent insurance, or term insurance. Many young couples look at term life insurance to cover income protection, outstanding liabilities, final expenses, and any future education expenses for their families.
If you or someone you know has any questions, we invite you to reach out to your CCM advisor for more information.
NOTE: The information provided in this article is intended for clients of Carlson Capital Management. We recommend that individuals consult with a professional adviser familiar with their particular situation for advice concerning specific investment, accounting, tax, and legal matters before taking any action.