Looking out for marriage gotchas (Washington state US version)
December 21, 2021 1:17 PM Subscribe
Long time partners considering marriage for practical benefits. We know some pros/cons, interested in filling in the list. Any gotchas? It's hard to back out!
No kids, already own a house together. We appreciate anything you can help us add to either list.
Pros:
Hospital rights (we have medical PoAs but expect a spouse to be treated better than a partner with a form)
Survivorship/inheritance benefits
Cons:
Washington is a community property state, so we'd need a prenup to keep our finances the way we like them (mostly separate, joint household account)
Although the calculators agree that we won't have a "marriage penalty" for taxes in our current circumstances, that could change. I guess that could just as easily change in our favor as against. Our salaries are pretty close now but may not always be.
Partner just turned this one up: we can't contribute to our individual Roth IRAS and file taxes separately, so we'd be committed to filing jointly. Should we care about that??
I did find this earlier post. Responses there are more focused on emotional/social impact, although I note not testifying in court and cheaper car rental sharing.
At this time it seems like the pros are a short list but potentially a really big deal, while the cons are surmountable. Thanks in advance for opinions/experiences/info.
No kids, already own a house together. We appreciate anything you can help us add to either list.
Pros:
Hospital rights (we have medical PoAs but expect a spouse to be treated better than a partner with a form)
Survivorship/inheritance benefits
Cons:
Washington is a community property state, so we'd need a prenup to keep our finances the way we like them (mostly separate, joint household account)
Although the calculators agree that we won't have a "marriage penalty" for taxes in our current circumstances, that could change. I guess that could just as easily change in our favor as against. Our salaries are pretty close now but may not always be.
Partner just turned this one up: we can't contribute to our individual Roth IRAS and file taxes separately, so we'd be committed to filing jointly. Should we care about that??
I did find this earlier post. Responses there are more focused on emotional/social impact, although I note not testifying in court and cheaper car rental sharing.
At this time it seems like the pros are a short list but potentially a really big deal, while the cons are surmountable. Thanks in advance for opinions/experiences/info.
If either of you would have cause to do FAFSA for school or wish to apply for other government programs, there's a huge difference between "person you live with" and "spouse."
posted by teremala at 1:33 PM on December 21, 2021 [3 favorites]
posted by teremala at 1:33 PM on December 21, 2021 [3 favorites]
Plenty of married people file separate income tax returns and plenty of married people make contributions to separate retirement accounts. I'm not sure what would prevent you from doing so.
It's definitely worth checking out the specific community property laws in Washington. In most jurisdictions, any property you own prior to the marriage, as well as any inheritance you may receive during the marriage, is treated as your separate property. However, all property and assets acquired during the marriage are likely to be treated as community property. Generally speaking, my understanding is that it's a bad idea to put marital money into an individually owned account, and this may render that account marital property (or at the very least make dividing the assets extremely tricky). The thing to do would be to open new retirement accounts as of the marriage, which should have the effect of the current accounts being separate property. I would think that a lot of this stuff could probably be solved with a prenuptial agreement, since you both seem to want the same things. A local family law attorney could likely give you the most clear answer to these questions as well as helping you set things up the way you and your future spouse would like it to be done.
posted by slkinsey at 1:33 PM on December 21, 2021 [2 favorites]
It's definitely worth checking out the specific community property laws in Washington. In most jurisdictions, any property you own prior to the marriage, as well as any inheritance you may receive during the marriage, is treated as your separate property. However, all property and assets acquired during the marriage are likely to be treated as community property. Generally speaking, my understanding is that it's a bad idea to put marital money into an individually owned account, and this may render that account marital property (or at the very least make dividing the assets extremely tricky). The thing to do would be to open new retirement accounts as of the marriage, which should have the effect of the current accounts being separate property. I would think that a lot of this stuff could probably be solved with a prenuptial agreement, since you both seem to want the same things. A local family law attorney could likely give you the most clear answer to these questions as well as helping you set things up the way you and your future spouse would like it to be done.
posted by slkinsey at 1:33 PM on December 21, 2021 [2 favorites]
One pro is that it can make things easier when traveling internationally. The hospital or jail you wind up in may not be local. (We haven't had to deal with that, fortunately. But, it has been one fewer annoying thing to explain in a language we don't speak in far less serious situations.) [edit: I realize that may seem at odds with what I said in the previous thread. Both have been true in different places.]
posted by eotvos at 1:50 PM on December 21, 2021 [4 favorites]
posted by eotvos at 1:50 PM on December 21, 2021 [4 favorites]
I will say that this "Probate for a married couple is trivial (lest agreement to the contrary, everything goes to the surviving spouse)." is not necessarily true, you should still have a will!
I am recently widowed in Washington state, spouse did not have a will, their parents are entitled to 25% of non-community property. And yes, that's anything that either of you owned before marriage, and anything you singly inherit after marriage. In my case, it's a trivial amount -- if all the more annoying for that, and in your case since you own the property jointly it might not be an issue for the biggest thing you own.
I have been both divorced and widowed in WA in the last three years (it's been A Time, for sure), and while I now know a lot about community property, I think a quick visit to a family law attorney would help you get what you want with the money stuff.
The benefits in a bad medical situation are HUGE, though, not just in the "you have permission to sign stuff" way but also in the "people assume you're supposed to be there" way. (ESPECIALLY in covid times)
A major con that has applied to a few people I've known is that if one of you becomes disabled, it may be very difficult for that person to get benefits if the other spouse has like, any, assets whatsoever. This was something that my second spouse and I talked about some; we decided that the next of kin aspects (and our desire to have a wedding!) outranked that possibility.
Good luck, whatever you decide!
posted by epersonae at 1:56 PM on December 21, 2021 [8 favorites]
I am recently widowed in Washington state, spouse did not have a will, their parents are entitled to 25% of non-community property. And yes, that's anything that either of you owned before marriage, and anything you singly inherit after marriage. In my case, it's a trivial amount -- if all the more annoying for that, and in your case since you own the property jointly it might not be an issue for the biggest thing you own.
I have been both divorced and widowed in WA in the last three years (it's been A Time, for sure), and while I now know a lot about community property, I think a quick visit to a family law attorney would help you get what you want with the money stuff.
The benefits in a bad medical situation are HUGE, though, not just in the "you have permission to sign stuff" way but also in the "people assume you're supposed to be there" way. (ESPECIALLY in covid times)
A major con that has applied to a few people I've known is that if one of you becomes disabled, it may be very difficult for that person to get benefits if the other spouse has like, any, assets whatsoever. This was something that my second spouse and I talked about some; we decided that the next of kin aspects (and our desire to have a wedding!) outranked that possibility.
Good luck, whatever you decide!
posted by epersonae at 1:56 PM on December 21, 2021 [8 favorites]
I just want to point out that tax filing status (single vs. married filing jointly vs. married filing separately, etc) DOES have repercussions for if and how much you can contribute to tax-advantaged retirement savings account.
If you are really concerned about financial or legal "gotchas" to marriage, you should consult with an attorney and/or accountant who can give you knowledgeable advice about your specific situation.
posted by stowaway at 2:08 PM on December 21, 2021 [6 favorites]
If you are really concerned about financial or legal "gotchas" to marriage, you should consult with an attorney and/or accountant who can give you knowledgeable advice about your specific situation.
posted by stowaway at 2:08 PM on December 21, 2021 [6 favorites]
I will say that this "Probate for a married couple is trivial (lest agreement to the contrary, everything goes to the surviving spouse)." is not necessarily true, you should still have a will!
Yes, this is important. The biggest thing for me--someone who got married as kind of a stunt marriage but also while living in Washington State--was that our families were now related. Which meant, or could mean, that inheritance could go to a person I didn't know that well unless we were careful to spell out who got what. Also some families get weird about knowing their relations sometimes and dependng how old you are this could be A Thing.
I was also very surprised how many people really felt that our relationship was different as a married couple than as two people who were in a committed relationship. Like, to ME it wasn't different basically at all, but to others just the magic words "we're married" could make people view you differently, this was particularly true with religious people, but not always.
posted by jessamyn at 2:26 PM on December 21, 2021 [2 favorites]
Yes, this is important. The biggest thing for me--someone who got married as kind of a stunt marriage but also while living in Washington State--was that our families were now related. Which meant, or could mean, that inheritance could go to a person I didn't know that well unless we were careful to spell out who got what. Also some families get weird about knowing their relations sometimes and dependng how old you are this could be A Thing.
I was also very surprised how many people really felt that our relationship was different as a married couple than as two people who were in a committed relationship. Like, to ME it wasn't different basically at all, but to others just the magic words "we're married" could make people view you differently, this was particularly true with religious people, but not always.
posted by jessamyn at 2:26 PM on December 21, 2021 [2 favorites]
Hi! I'm a fellow Washingtonian who got married for practical reasons and then it turns out really is thrilled to be married.
I would say 90% of the benefits are emotional and not practical. But the hospital one is a biggie. Also the ease at which you can get insurance for one another. The biggest one by far for me is traveling together.
We got married to more easily move to London together. So if for any reason you need to leave the country keep that in mind. However when we were traveling through Europe it was so much easier to communicate with various officials in and if we needed to as a married couple.
posted by pazazygeek at 2:40 PM on December 21, 2021 [1 favorite]
I would say 90% of the benefits are emotional and not practical. But the hospital one is a biggie. Also the ease at which you can get insurance for one another. The biggest one by far for me is traveling together.
We got married to more easily move to London together. So if for any reason you need to leave the country keep that in mind. However when we were traveling through Europe it was so much easier to communicate with various officials in and if we needed to as a married couple.
posted by pazazygeek at 2:40 PM on December 21, 2021 [1 favorite]
I am concerned about my husband getting saddled with health care bills in the event of something like cancer or dementia.
My dad died of dementia and my mom lost all their savings caring for him and then had tens of thousands of dollars in bills. Then she died of cancer leaving tens of thousands in bills.
Maybe there are smart ways to handle this?
posted by ReluctantViking at 2:52 PM on December 21, 2021
My dad died of dementia and my mom lost all their savings caring for him and then had tens of thousands of dollars in bills. Then she died of cancer leaving tens of thousands in bills.
Maybe there are smart ways to handle this?
posted by ReluctantViking at 2:52 PM on December 21, 2021
If one or both of you has student loans you’re able to defer or reduce payments on because your income is below a threshold, filing jointly may be an expensive move. It may even be so expensive that you decide to continue to file separately to avoid loan repayment, which will negate some of the financial advantages of marriage.
posted by caek at 3:03 PM on December 21, 2021 [1 favorite]
posted by caek at 3:03 PM on December 21, 2021 [1 favorite]
Partner just turned this one up: we can't contribute to our individual Roth IRAS and file taxes separately, so we'd be committed to filing jointly. Should we care about that??
When you file separately, you both have to itemize or both take the standard deduction. You each get 10K in SALT deductions now (state and local taxes - though WA has no income tax) but when you are married, you only get 10K together, so your AGI might go up.
posted by soelo at 3:23 PM on December 21, 2021
When you file separately, you both have to itemize or both take the standard deduction. You each get 10K in SALT deductions now (state and local taxes - though WA has no income tax) but when you are married, you only get 10K together, so your AGI might go up.
posted by soelo at 3:23 PM on December 21, 2021
This is a bit of reach but there may be other insurance savings. On our "pro" list was being able to keep our preferred car insurance on a joint policy. My husband preferred his car insurance company (who is also insures our home) but for slightly archaic reasons I could not be on the policy as a non-spouse.
I also really trust my partner (now my spouse) and our views are aligned on end of life/catastrophic event care & funeral arrangements. Beyond just hospital visitation (should the need arise), I want my partner to be able to make decisions on my behalf if needed. My family hasn't historically made end of life/catastrophic event decisions that I agree with and I would not want a non-spousal partner to have additional legal negotiations due to marital status. This can be addressed through power of attorney/medical power of attorney BUT I like the safety net.
posted by countrymod at 4:50 PM on December 21, 2021 [1 favorite]
I also really trust my partner (now my spouse) and our views are aligned on end of life/catastrophic event care & funeral arrangements. Beyond just hospital visitation (should the need arise), I want my partner to be able to make decisions on my behalf if needed. My family hasn't historically made end of life/catastrophic event decisions that I agree with and I would not want a non-spousal partner to have additional legal negotiations due to marital status. This can be addressed through power of attorney/medical power of attorney BUT I like the safety net.
posted by countrymod at 4:50 PM on December 21, 2021 [1 favorite]
Wikipedia, of all places, has a long list here of what comes with marriage. A lot of it is jurisdiction dependent of course (NC is another state where your spouse does not automatically inherit should you die without a will), but it's a good start to get you thinking about issues that a lot of folks don't think about/don't want to think about until they need to do so - not having to testify against your spouse, visitation rights in prison, more extensive DV protections, a more seamless adoption process should y'all decide to have children via adoption, etc. Honestly, a lot of the benefits of marriage come when something goes wrong.
For us, the most important drivers for getting legally married (her girlfriend is already married or we might have had to flip a coin) were being taken more seriously as a couple and being able to make medical decisions. My wife absolutely did not want her mother to make medical decisions for her, so we pushed up our legal marriage (it was that weird time before Obergefell when same-sex marriage was recognized by the VA but not the feds and not NC). It has also been WILD how much less friction we run into as a couple now that we're married and SSM is legally recognized in the U.S. We carry a copy of the marriage license with us, but we've never needed it - banks, emergency rooms, the VA, our joint employer, the AAA tow dude - as soon as they hear "wife" it's "come on back/how can we help you/how long y'all been married/oh that's right nice." We don't share a last name and we're of difference races, and no one even blinks. It's wild.
posted by joycehealy at 5:40 PM on December 21, 2021 [5 favorites]
For us, the most important drivers for getting legally married (her girlfriend is already married or we might have had to flip a coin) were being taken more seriously as a couple and being able to make medical decisions. My wife absolutely did not want her mother to make medical decisions for her, so we pushed up our legal marriage (it was that weird time before Obergefell when same-sex marriage was recognized by the VA but not the feds and not NC). It has also been WILD how much less friction we run into as a couple now that we're married and SSM is legally recognized in the U.S. We carry a copy of the marriage license with us, but we've never needed it - banks, emergency rooms, the VA, our joint employer, the AAA tow dude - as soon as they hear "wife" it's "come on back/how can we help you/how long y'all been married/oh that's right nice." We don't share a last name and we're of difference races, and no one even blinks. It's wild.
posted by joycehealy at 5:40 PM on December 21, 2021 [5 favorites]
So as not to abuse the edit window: if either of you is a vet, the other can get on Tricare and some other stuff, the details of which escape me because we keep not getting around to it because I have good insurance through work and we haven't wanted to deal with it because of the rona.
posted by joycehealy at 5:41 PM on December 21, 2021
posted by joycehealy at 5:41 PM on December 21, 2021
It can definitely change Social Security payments. If the spouse with higher benefits dies first, the survivor continues to get that larger amount. At least I think that's the way it works. SS and Medicare are both way more confusing than seems necessary.
posted by SemiSalt at 5:49 PM on December 21, 2021 [1 favorite]
posted by SemiSalt at 5:49 PM on December 21, 2021 [1 favorite]
Not sure about Washington, but in PA the tax on inherited property or accounts is 4.5% to spouses, children, parents and others in a direct line. Siblings pay 12% and anyone else pays 15%. You might check what, if any, inheritance tax your heirs might be subject to. Just another data point to consider.
posted by citygirl at 6:20 PM on December 21, 2021
posted by citygirl at 6:20 PM on December 21, 2021
The marriage penalty is gigantic if one of you becomes a high earner. Tax rates on the lower earner’s income can exceed 60% when they would be 15% or less if single. (Not quite that extreme in Washington State for the time being with no state income tax but that may not last much longer.)
posted by MattD at 7:34 PM on December 21, 2021
posted by MattD at 7:34 PM on December 21, 2021
I just want to point out that tax filing status (single vs. married filing jointly vs. married filing separately, etc) DOES have repercussions for if and how much you can contribute to tax-advantaged retirement savings account.
I don't think it does for Roth IRA? With the existence of the backdoor Roth IRA, there is effectively no income limit for anyone contributing to a Roth IRA - single, married filing jointly, or married filing separately alike. Would be happy to be demonstrated wrong here, though, if there's something I'm missing that you're leaving unstated.
posted by saeculorum at 8:47 PM on December 21, 2021
I don't think it does for Roth IRA? With the existence of the backdoor Roth IRA, there is effectively no income limit for anyone contributing to a Roth IRA - single, married filing jointly, or married filing separately alike. Would be happy to be demonstrated wrong here, though, if there's something I'm missing that you're leaving unstated.
posted by saeculorum at 8:47 PM on December 21, 2021
The IRS agrees that your Roth contribution limit is $0 is you file MFS, have income over $10K, and lived together during the year. If you file jointly, your limit is $6K (or $7k if over 50) each until your joint income is over $198K.
You should have a good reason for filing separately, because most of the time it will increase your tax bill.
posted by soelo at 9:59 PM on December 21, 2021 [1 favorite]
You should have a good reason for filing separately, because most of the time it will increase your tax bill.
posted by soelo at 9:59 PM on December 21, 2021 [1 favorite]
The marriage penalty is gigantic if one of you becomes a high earner. Tax rates on the lower earner’s income can exceed 60% when they would be 15% or less if single.
The highest combination of state and federal income tax rates I can see is 50% for California resident couples earning $1.25M or more. You could only get to 60% if you start getting all sea-lion-y about other taxes that are technically taxes on income but that most native speakers of American English would not include as "income tax."
If one of you is earning enough to push you into that combination of brackets while the other is in a tax bracket at around 15%, then one of you is earning millions a year. Why would you give a fuck about the taxes on the less than $40K the other spouse is earning to put them in a 15% combination of brackets? Whether those taxes are 0% or 60% or 200% make no difference to your lives.
posted by GCU Sweet and Full of Grace at 7:05 AM on December 22, 2021
The highest combination of state and federal income tax rates I can see is 50% for California resident couples earning $1.25M or more. You could only get to 60% if you start getting all sea-lion-y about other taxes that are technically taxes on income but that most native speakers of American English would not include as "income tax."
If one of you is earning enough to push you into that combination of brackets while the other is in a tax bracket at around 15%, then one of you is earning millions a year. Why would you give a fuck about the taxes on the less than $40K the other spouse is earning to put them in a 15% combination of brackets? Whether those taxes are 0% or 60% or 200% make no difference to your lives.
posted by GCU Sweet and Full of Grace at 7:05 AM on December 22, 2021
The IRS agrees that your Roth contribution limit is $0
The IRS is only accounting for Roth contributions, not Roth conversions. People of any income level can execute a backdoor Roth IRA conversion and hence, there is effectively no income limit for contribution (through conversion) a Roth IRA.
posted by saeculorum at 8:59 AM on December 22, 2021
The IRS is only accounting for Roth contributions, not Roth conversions. People of any income level can execute a backdoor Roth IRA conversion and hence, there is effectively no income limit for contribution (through conversion) a Roth IRA.
posted by saeculorum at 8:59 AM on December 22, 2021
The marriage penalty is gigantic if one of you becomes a high earner. Tax rates on the lower earner’s income can exceed 60% when they would be 15% or less if single.
I don't quite see how this follows. My understanding is that US tax rates are marginal, meaning that higher tax rates only apply to the portion of income that exceeds the income limit for the lower tax rate. According to this chart, the tax brackets for married filing jointly are exactly double the amounts for single until the 35% tax bracket ($209,426 to $523,600 single, $418,851 to $628,300 joint married).
Looking at the tax brackets from that chart and imagining a situation in which one person makes $40,000 and the other makes $400,000, after applying the relevant standard deductions I came up with $4,295 in federal income tax for a single income of $40,000 (8.6% overall) and $109,761 in federal income for a single income of $400,000 (27.4% overall). This compares to $97,524 in federal income that would be paid by a married couple with a combined income of $440,000 (21.7% overall). That's a tax savings of $16,532 for the married couple. Most likely the taxes paid by the couple would be even lower considering that they are likely to have additional deductions (e.g., interest on mortgage payments) and other tax-reducing mechanisms.
It's true here are several states in which state income taxes for a married couple filing jointly are higher than they would be if the spouses were single, although my understanding is that it's usually possible to file joint federal and single state taxes to have the most advantageous result on both fronts. In any event, Washington doesn't have state income taxes.
posted by slkinsey at 9:03 AM on December 22, 2021 [1 favorite]
I don't quite see how this follows. My understanding is that US tax rates are marginal, meaning that higher tax rates only apply to the portion of income that exceeds the income limit for the lower tax rate. According to this chart, the tax brackets for married filing jointly are exactly double the amounts for single until the 35% tax bracket ($209,426 to $523,600 single, $418,851 to $628,300 joint married).
Looking at the tax brackets from that chart and imagining a situation in which one person makes $40,000 and the other makes $400,000, after applying the relevant standard deductions I came up with $4,295 in federal income tax for a single income of $40,000 (8.6% overall) and $109,761 in federal income for a single income of $400,000 (27.4% overall). This compares to $97,524 in federal income that would be paid by a married couple with a combined income of $440,000 (21.7% overall). That's a tax savings of $16,532 for the married couple. Most likely the taxes paid by the couple would be even lower considering that they are likely to have additional deductions (e.g., interest on mortgage payments) and other tax-reducing mechanisms.
It's true here are several states in which state income taxes for a married couple filing jointly are higher than they would be if the spouses were single, although my understanding is that it's usually possible to file joint federal and single state taxes to have the most advantageous result on both fronts. In any event, Washington doesn't have state income taxes.
posted by slkinsey at 9:03 AM on December 22, 2021 [1 favorite]
Response by poster: Thanks all for the good info. If we actually get off our butts and proceed I think a family law attorney sounds like a good idea, especially since our financial preferences are so different from state law here.
posted by HaveYouTriedRebooting at 11:01 AM on December 23, 2021
posted by HaveYouTriedRebooting at 11:01 AM on December 23, 2021
This thread is closed to new comments.
I'm not sure what the Roth IRA has to do with tax filing status here. Both people in a marriage can have individual Roth (or Traditional) IRAs. As you said, Washington is a community property state, so if you wanted to keep the IRAs outside community property, that would need to be established with a pre-nuptial agreement. However, there is no barrier to having distinct Roth IRAs post-marriage.
There's also nothing stopping you from calculating your taxes separately as well as jointly, and then accounting for your taxes as if they were separately filed. In other words, say Partner A would have paid $5K in taxes by themselves, and Partner B would have paid $6K in taxes by themselves, and Partner A+B married jointly ends up being $10K. You could say that Partner A is responsible for 5/11 of the taxes, Partner B is responsible for 6/11 of the taxes, and then account for taxes as Partner A paying (5/11)*$10000 = $4545 and Partner B paying (6/11)*$10000 = $5455.
There are a few other benefits from marriage that may or may not apply to you:
- Married couples cannot be compelled to testify against each other.
- Probate for a married couple is trivial (lest agreement to the contrary, everything goes to the surviving spouse).
- Family health insurance paid for by the employer (in case one partner loses their job, for instance), is not taxable.
- Many employers have more generous benefits for married couples. As an example, one of my employers would not pay bereavement leave for non-married couples.
- Social Security will cover widows, but not domestic partners.
There are longer lists of legal rights of marriage available, but I think the one from Wikipedia is fairly concise and includes prominent considerations.posted by saeculorum at 1:31 PM on December 21, 2021 [6 favorites]