Financial Advice Line

Give finances a clean sweep when taking big leap

by Sandra Block, USA Today

If you're getting married this summer, you've probably got a lot on your mind: ordering enough food, picking a lively band, keeping Uncle Phil away from the bridesmaids.

But in the rush to plan your wedding, don't overlook your finances. These days, engaged couples bring a lot of baggage to the union: investment portfolios, dual incomes, real estate and children from previous marriages. Some financial issues you and your beloved should discuss before the honeymoon:

Taxes. If both you and your spouse continue to work after the wedding, there's a good chance you'll see your taxes increase. Last year's tax relief bill will gradually increase the standard deduction for married couples, but the provision doesn't take effect until 2005. A bill that passed the House last week would start increasing the deduction in 2003. But even if the bill is signed into law, full relief won't come until 2009.

If you believe you'll be hit with the marriage penalty, there are a few things you can do now to lessen the pain:

Itemize on your tax returns. Dual-income couples who take the standard deduction instead of itemizing are hardest hit by the marriage penalty, says Bob Scharin, editor of RIA's Practical Tax Strategies .

This year, the standard deduction for a single taxpayer is $4,700, so an unmarried couple filing separately could claim up to $9,400. The standard deduction for a married couple filing jointly is $7,850.

For that reason, itemizing may reduce your tax bite, Scharin says. Start keeping track of deductible expenses, such as charitable contributions and state and local taxes, he says. If you buy a house, keep track of deductible mortgage expenses and your mortgage interest. Most tax-preparation software programs and Web sites will help you figure out whether you're better off taking the standard deduction or itemizing.

Increase the amount withheld from your paycheck by adjusting your W-4 form. This won't reduce your taxes, but it will help avoid a big tax bill at the end of the year. H&R Block offers a withholding calculator at www.hrblock.com.

Insurance. Your insurance needs may change after you're married, so it's a good idea to review your coverage in several areas:

Health. If you're both covered by employer-sponsored plans, consider combining policies. It's usually less expensive to pay for one plan and add a spouse as a dependent than to pay for two policies, says Steven Paul, vice president of Insurance.com, a consumer site owned by Fidelity Investments. If you're self-employed and paying for an individual policy, you may be able to save a lot by joining the group plan offered by your spouse's employer.

Cost shouldn't be your only consideration when comparing plans, Paul says. You should also look at the amount of coverage provided, convenience and the participating doctors and hospitals.

Life. Many couples don't think about life insurance until they have kids. But even if you're childless, your death could create a financial hardship for your spouse. For example, if you own a house, your spouse may not be able to afford the mortgage alone. If you already have a policy, review it to make sure it provides adequate protection for your spouse. And don't forget to update any existing policies to list your spouse as a beneficiary.

Home and auto. You may need to increase your homeowner's insurance or renter's insurance, particularly if one spouse owns jewelry, furs or other valuables.

If you both own cars, combining your separate auto policies into a single policy could lower your premiums. You may also get a marriage discount, because insurers believe married people are safer drivers, Paul says.

Prenuptial agreements. Prenups aren't just for celebrities and CEOs, says Alan Kopit of Lawyers .com, a Web site for consumers. Who should consider a prenup:

Couples with children from previous marriages. A prenup, combined with estate planning, can ensure that your assets go to your children instead of your spouse after you die, Kopit says.

Couples with substantial assets. A prenuptial agreement will help establish a record of what you owned before you got married, which could be important if the marriage doesn't last.

"Fifty years ago, many of these contracts were viewed as void because it was believed they encouraged divorce," Kopit says. "Today, we're in a different frame of mind."