Getting married is a big deal, but there are things to consider before you take the plunge. In this article, we discuss the four financial considerations to know before getting married.
Marriage can be an exciting moment in your life, but once you get married, you’re both financially linked in many ways and in the event of divorce, this can cause an array of issues.
A prenuptial agreement is the best way to ensure you are protected if your marriage doesn’t work out in the future. But it’s essential to note that there are also financial positives to getting married, as well as negative ones.
To learn more about the four financial considerations to know before getting married, keep reading…
What are the Financial Implications of Marriage?
1. Joint Bank Accounts Impact Your Credit Score
When getting married, it’s likely that you want to consider opening a joint bank account so that you can easily share money between yourselves for bills and other matters. But before you decide to go ahead with doing this, it is essential to recognise that a joint bank account can impact your personal credit score.
Having a joint bank account means that you are co-scored, linking your credit score together. What this means is that If your partner has a significant amount of debt and a low credit score, this will impact your credit score.
Where your credit scores are linked, this also takes away some privacy, meaning your spouse will be able to see what you spend money on.
It’s important to note that you don’t have to be married to open a joint account, but marriage is often when individuals decide to do so.
2. Finances and Divorce
As we have mentioned, marriage financially links you, which can make matters difficult should you need to get divorced in the future. This is because divorce does not automatically financially unlink you. The only way to completely sever your financial commitment is by getting a financial order from the court.
When marrying, your assets are divided into two different categories, matrimonial assets (acquired during the marriage), which involves property, cars, etc. Non-matrimonial assets (acquired prior to the marriage) involve pensions, savings and investments. Most often during divorce only matrimonial assets are considered, but in some instances, non-matrimonial assets will come into account.
Unfortunately this could mean your hard-saved money, including investments, and more importantly your pension, could be severely impacted. Should your pension need to be included when making a divorce financial settlement or a financial order, there are ways to protect it, such as pension offsetting.
What Are the Financial Benefits of Marriage?
3. Marriage Allowance
Not everyone is aware of the financial benefits that marriage has. A lot of time, people want to get married for the ring, the ceremony, the honeymoon and because of the love they share with their partner. However, historically marriage was created to benefit men.
Marriage was a way to form alliances between families, as well as the economic and political reasons. Still to this day marriage provides financial benefits, such as marriage allowance.
Marriage allowance occurs when one spouse earns more than the basic-rate taxpayer, and the other spouse does not earn enough income to pay tax. Meaning one spouse can transfer part of their tax-free allowance to their spouse, which does pay income tax, allowing them to save money each tax year.
4. Inheritance Tax
The inheritance tax nil-rate band is currently set at £325,000, meaning each individual’s estate can be valued up to this amount before it is required to pay the standard inheritance tax (IHT) rate of 40%. But when you are married, the circumstances change slightly, including:
- When you leave all assets above the NRB to a surviving spouse, no IHT will be due
- When the second spouse dies, both IHT allowances can be joined together, meaning anything valued below £650,000 can be left IHT-free – an additional £175,000 per spouse can be added on top when the family property is left to children or grandchildren. This is known as the residence nil rate band (RNRB).
Marriage Is a Significant Financial Commitment
There is no doubt that the thought of marriage is great, especially when you get to spend the rest of your life with the person you love. But what we can conclude from this article is that there is a financial impact that marriage can have on your life, both in a positive and negative way.
As well as what we have listed above, there are other matters to take into consideration, including the cost of living crisis, property, insurance, budgeting and more.
How has marriage financially impacted your life? Let us know in the comments.
Please be advised that this article is for general informational purposes only, and should not be used as a substitute for advice from a trained financial professional. Be sure to consult a financial advisor if you’re seeking advice on your finances within marriage. We are not liable for risks or issues associated with using or acting upon the information on this site.
