Financial Planning for Marriage
June 27th, 2008 | by Editor |Financial advisors often are most valuable when you’re faced with a significant life event such as buying a home, having kids, or, in the case of the advice we’ve collected below, getting married.
A true romantic would never sully marriage with pesky financial details. But consider this, Romeo: if your financial arrangements are not in order before you tie the knot, you could be faced with any or all of the following issues:
• dying without a will
• leaving assets to unintended people upon your death
• high probate fees
• high taxation
• loss of significant wealth if your marriage breaks down.
In a column for The Globe & Mail, Tim Cestnick offers some valuable tips for any would-be groom or bride.
Prepare a will: Any existing wills that do not include consideration of your marriage will be revoked when you are married. You and your spouse should make new wills to ensure that your estate will be distributed as you intended.
Set up a spousal trust: In the will mentioned above, you may want to leave your non-registered income-producing assets to a trust rather than directly to your spouse. Your spouse can split income with the trust and receive significant tax savings.
Change your beneficiaries: There are tax advantages to having your spouse named as beneficiary on your registered retirement savings plan, life insurance policies, pension plan, and employee benefit plan at work.
Consider joint ownership: Consider holding assets jointly. This strategy can help to minimize probate fees at the time of your death or your spouse’s.
Consider a prenuptial agreement: It’s a touchy subject, but a prenuptial agreement is quite important for anyone entering a second marriage or with significant assets. In the event of a divorce, a pre-nup can reduce your losses and protect your assets for the benefit of existing children.
Create a spousal RRSP: A spousal RRSP can help equalize you and your spouse’s income in retirement, which will minimize your taxes as a couple. If you’re likely to have a higher income in retirement, start setting aside money for the benefit of existing children.
Make a loan to your new spouse: If your income is much higher than your spouse’s, and you have investments outside an RRSP, consider lending money to your spouse to invest. If you change the prescribed rate of interest on that loan (currently 3 per cent), you’ll shift income to your spouse’s hands, saving tax over all.
Whether you’re married yet or not, some of the strategies mentioned above may apply to you.
Related Articles:
- Financial Planning: The Big Picture
2 Responses to “Financial Planning for Marriage”
By health tonik insurance on Jan 7, 2009 | Reply
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By Estate Taxes on Nov 12, 2009 | Reply
Great post. This is actually a great gude to everyone who wants to get married nowadays. It’s an on time post because I’m being reminded about this.