I'm marrying someone with bad credit. How will this affect me?

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1 Am I liable for my spouse's debts? The general rule is that spouses are not responsible for each other's debts, but there are exceptions. Many states will hold both spouses responsible for a debt incurred by one spouse if the debt constituted a family expense (e.g., child care or groceries). In addition, community property states will hold one spouse responsible for the other's debts because both spouses have equal rights to each other's income. Also, you are both responsible for any debt that you have in both names (e.g., mortgage, home equity loan, credit card). I'm marrying someone with bad credit. How will this affect me? You are not responsible for your future spouse's bad credit or debt, unless you choose to take it on by getting a loan together to pay off the debt. However, your future spouse's credit problems can prevent you from getting credit as a couple after you're married. Even if you've had spotless credit, you may be turned down for credit cards or loans that you apply for together if your spouse has had serious problems. You're smart to face this issue now rather than wait until after you're married to discuss it. Attitudes toward spending money, along with credit and debt problems, often lead to arguments that can strain a marriage. Order copies of both of your credit reports from one or more major credit reporting bureaus. Then, sit down and honestly discuss your past and future finances. Find out why your future spouse got into trouble with credit. Next, if there is still outstanding debt, consider going through credit counseling together. Credit counseling may help your future spouse clean up his or her credit record and get back on track financially. One nonprofit organization, Consumer Credit Counseling Services (CCCS), sponsors money management seminars that can help you plan your financial life together. CCCS can also help you negotiate with creditors and can set up a budget you both can follow to pay off outstanding debt. Look in your telephone directory for the number of a local office. Be aware, however, that CCCS is paid for by lenders. Once it starts negotiating for you, your creditors will withdraw any lines of credit you have, including overdraft protection. Finally, seriously consider keeping your credit separate, at least until your spouse's credit record improves. You don't have to combine your credit when you marry. For instance, apply for credit by yourself instead of applying for joint credit after you're married. You can have separate "associate" cards issued for your spouse to use. Even if your spouse has bad credit, your credit rating will remain unaffected. However, keeping separate credit can be complicated. For one thing, your spouse may resent that you control all of the credit in the household. It's also possible that you'll have a harder time qualifying for loans (e.g., a mortgage) alone than if your spouse's income could also be counted.

2 Should I be investing more aggressively? There's no way to know the answer to that without reviewing your individual circumstances and financial goals. However, if you are investing too conservatively, it can have a profound effect on your long-term financial security. That's particularly true for women. According to a U.S. Department of Labor study ("Women and Retirement Savings," October 2008), women often start saving later, save less, and invest more conservatively than men, which decreases their chances of having enough income in retirement. How you should be investing depends on many factors, such as: 1) How able are you to tolerate risk? 2) How soon do you hope to achieve your financial goals? 3) How much will you need to save for important goals such as retirement? 4) What rate of return would you need to try to reach your goals? and 5) Is income, growth, or safety most important to you? If you wonder whether you're invested appropriately, the first step is to get some answers to those questions. You don't have to become a financial expert to develop a solid investment plan. Even many highly paid executives are often uncertain when it comes to money questions, and seek out help from a financial professional who can help answer those questions. Reluctance to invest in the stock market is often the result of financial illiteracy, according to a 2010 Library of Congress study prepared for the Securities and Exchange Commission ("Behavioral Patterns and Pitfalls of U.S. Investors"). If that's true for you, becoming more knowledgeable about investing basics and working with someone who can show you how they apply to you is the first step toward having a sound financial plan. I don't know much about investing. Should I let my husband make the decisions? Even if your husband is a financial expert, it's a good idea to at least understand investing basics. For one thing, because women on average tend to live longer than men, the odds are extremely high that you could be responsible for making your own financial decisions at some point. If you suddenly had to make all the decisions yourself--and many women have found themselves in that position--you'd benefit from knowing enough to protect yourself from fraud and/or communicate effectively with a financial professional. Also, even if your spouse is more knowledgeable about finances than you are, understanding enough to consider the pros and cons involved in an individual financial decision can often produce a better outcome; it forces both of you to address questions you might not have considered otherwise. Knowing why a decision was made can help minimize second-guessing on either side later. If you disagree about a particular investment, remember that though diversification doesn't guarantee a profit or prevent the possibility of loss, a diversified portfolio should have a place for both conservative and more aggressive investments. There may be ways to accommodate both spouses' concerns, and a neutral third party with some expertise and a dispassionate view of the situation may be able to help you work through differences.

3 I'm about to get married. Should I adjust the asset allocation in my 401(k) to take my husband's investments into account? That depends on several factors. Perhaps the first step is to make sure your existing asset allocation is appropriate for your circumstances; if you haven't reviewed it in several years, you should probably take a fresh look at it, whether or not you intend to consider his assets in your investing strategy. Assuming your allocation is appropriate for your current situation, you may want to make sure that any overlap between your accounts doesn't create a portfolio that's too heavily concentrated in a single position. For example, if you have received company stock as part of your compensation plan for many years, you might not have enough diversity in your portfolio; if both of you have worked at the same employer, the problem could be even worse. However, you don't necessarily need to make dramatic changes right away. No matter how compatible you might be, marriages have been known to fail, and sometimes they fail in a shorter time frame than anyone ever expected. If you do decide to make adjustments, remember that you can phase them in gradually to create an asset allocation strategy that includes both portfolios. For example, you might decide to simply allocate new money to a different investment or asset class rather than shift existing assets. Explain to your husband why you've chosen to invest as you have; you may have a perspective he's overlooked or information he hasn't considered that could be helpful even if you manage your portfolios entirely independently. And since it's your account, you have the final say. If there's a difference in your investing philosophies, a neutral third party with some expertise and a dispassionate view of the situation may be able to help work through differences; that can be especially valuable in cases where substantial assets are at stake. I'll be changing jobs next month, and I'm pregnant. Will I qualify for health insurance coverage with my new employer? That depends on several factors. If your new employer offers a group health insurance plan, the federal Health Insurance Portability and Accountability Act (HIPAA) may apply. This act prevents your new group health plan from treating your pregnancy as a pre-existing condition if you were covered by group health insurance through your previous employer. But read your new policy carefully. Although most health plans cover maternity care and pregnancy, your new plan is not required to do so if it doesn't normally offer such coverage. Unfortunately, you won't qualify for the protection offered by HIPAA if you had an individual (nongroup) health policy or if you had no health insurance at all. In either case, your pregnancy could be considered a pre-existing condition, and you may be subject to a waiting period under your new health plan. Even if your new employer's group plan includes pregnancy and maternity care, you may be subject to such a waiting period before you become eligible for coverage. So, if you need prenatal care during this period, you may need to pay for the doctor's visits out of your own pocket. Remember that you may need more care near the end of your term. You may be able to continue health coverage through your previous employer under the Consolidated Omnibus Budget Reconciliation Act, but you'll have to pay the full premiums yourself. Of course, your new company may not provide health insurance coverage. In this case, you can apply for an individual health insurance policy, but it will be difficult to find an insurer that will cover you at an affordable price due to your pregnancy. Therefore, before you take a new job, make sure that you understand the coverage and eligibility requirements of your new employer's health insurance plan. Plan carefully for the protection of your health and the

4 health of your baby. The Patient Protection and Affordable Care Act of 2010 changes how plans treat pre-existing conditions. Beginning in 2014, all health insurers must sell coverage to everyone who applies, regardless of their medical history or health status, nor can plans exclude coverage for those medical conditions. My employer says that after my child is born, I have to come back to work in six weeks. But doesn't the law say that I'm entitled to three months of leave? The law you're referring to is known as the Family and Medical Leave Act (FMLA). It entitles you to take up to 12 weeks of unpaid leave to care for your new child, but only if you work for a covered employer and meet certain eligibility criteria. Under this law, while you're on leave, your employer-sponsored health insurance benefits are protected, and your employer must return you to the same job or a similar job when you come back to work. You may be covered under the FMLA if: You work for a private company that has 50 or more employees, or you work for a public school or agency that has less than 50 employees, and You have worked at least 12 months (not necessarily consecutively) for that employer, and you have worked at least 1,250 hours during the 12 months immediately preceding your FMLA leave start date Even if you are covered by the FMLA, your employer can require you to use any vacation days, sick days, or personal days you've accumulated in place of unpaid leave time. For instance, if you've accumulated two weeks of vacation time, your employer can ask you to use those weeks first, before giving you an additional 10 weeks of unpaid leave. You're also required to give your employer at least 30 days' notice of your need for leave, or as much notice as possible, depending on the circumstances. You should also check the rules of your state, because some states have their own parental leave rules and may pay disability benefits to new mothers. However, if you're not covered by any law, there's not much you can do. Unless you can negotiate more leave time with your employer, you'll either have to go back to work after six weeks or face losing your job. Does it make sense financially for both me and my spouse to work after our child is born? Following the birth of your child, you may feel that both you and your spouse need to work to meet household expenses and maintain your current lifestyle. However, you may discover that one of you can stay home without seriously affecting your net income. Though you would have to do without a second income, you need to factor in what you'd save:

5 Child-care costs: The cost per child for a day-care facility, nursery school, or nanny Commuting costs: Gasoline, wear and tear on your car, tolls, and parking Clothing: Work clothes and dry cleaning Restaurant and take-out food: Prepared dinners you purchase because you have no time to cook Lunches out: You have more time to prepare your own House cleaning and gardening: Hired help to clean the house and mow the lawn Taxes: With only one salary, you may move into a lower tax bracket Now, consider the adverse effects of becoming a single-income household. The most obvious, of course, is a reduced family income. You should also consider what effect a leave of absence will have on the stay-at-home spouse's career and your family's retirement plans. You may both be at a point in your careers where you are earning high salaries. Leaving your job now may mean having to start over lower on the career ladder. And if one of you leaves work, you may miss the opportunity to fully fund your employer-sponsored retirement plan. Further, with only one income, you are more vulnerable in the event of an economic downturn. Finally, the stay-at-home spouse may lose the sense of accomplishment and community one gets from working outside the home. You should balance all the issues, both pro and con. And remember, although it may make sense for both of you to continue working, some nonfinancial considerations, such as the opportunity to raise and supervise your child in your own home, may outweigh your financial concerns. My spouse and I are filing separate returns. Can we both itemize our deductions? If so, how do we split the deductions? When spouses file separately, both must use the same method of claiming deductions. That is, either both parties must itemize, or both parties must take the standard deduction. If you choose to itemize, it's important to know how to divide your deductions. If your filing status is married filing separately, you typically report on your income tax return only your own income, expenses, credits, and deductions. Therefore, if you paid for a doctor's appointment out of your separate checking account, you would claim that deduction on your return. Any medical expenses paid out of a joint checking account in which you and your spouse have the same interest are considered to have been paid equally by each of you, unless you can show otherwise. Different rules may apply in community property states. You should also be aware that the amount of your total itemized deductions will be limited or phased out if your adjusted gross income exceeds certain levels in Note: For 2010 to 2012, the limitation on itemized deductions for higher-income individuals is repealed by the Economic Growth and Tax Relief Reconciliation Act of 2001 and the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of Often, married couples have a lower overall tax liability if they choose to file jointly. This is not always the case, however. If you are unsure which filing method results in the lowest tax liability, you should determine your tax liability both ways before filing your return. For more information, see IRS Publication 17 or consult a tax professional.

6 Should my partner and I buy a house together even though we're not married? If you want to buy a home with your partner, go ahead. Together, you may be able to qualify for a larger mortgage than if one partner alone applied for the loan. However, be aware that unmarried partners have some unique considerations that married couples don't have. The laws dealing with the distribution of property when a couple splits up or a partner dies are few and vague when the couple is not married. So it's crucial for unmarried partners to have a detailed written agreement regarding their respective ownership interests in the property and their intentions for distribution of the property if either partner should die or if the relationship ends. Both partners should also keep thorough and accurate records of their respective contributions. You and your partner can own the property in one of many ways, including: Joint tenants with rights of survivorship Tenants in common Individually in one of your names In trust Joint tenancy with rights of survivorship means that when one partner dies, the surviving partner automatically owns the entire property, bypassing the probate process. This way of owning property may make it more difficult to sell your share of the property without your partner's consent. However, it may also offer creditor protection because neither partner owns a separate share; instead, both own equal rights in the entire property. As tenants in common, you and your partner each can leave your portion of the property to whomever you choose in your wills. Creditors of tenants in common may have an easier time attaching the property than if it were owned jointly with rights of survivorship. You and your partner may decide that only one of you will own the property. However, if you choose individual ownership, beware. The person named on the deed will be able to sell the property without the consent or even the knowledge of the other partner. You can also choose to own the property in trust, with the trust agreement spelling out the rights and obligations of each partner. You'll want to get advice from an experienced attorney on all of the ownership options available to you and your partner.

7 I can choose a single life annuity for my pension or a joint and survivor annuity that makes payments to my spouse when I die. Which is better? It depends on your circumstances. If you're not married, the single life annuity is clearly the best choice (and may be your only option). You'll receive the maximum payout from your pension during your life, and all benefits will cease when you die. This option may even make sense if you're married (assuming that you have other ways to take care of your surviving spouse, such as investments or retirement plan assets), and the difference between the higher-paying single life annuity and the joint and survivor annuity is very great. (The joint and survivor annuity benefits paid to you during your life will be smaller than if you elected a single life annuity, because they are payable as long as either person is alive.) One common strategy is to choose the single life annuity and buy life insurance to protect your spouse, using some or all of the difference in benefits between the higher-paying single life annuity and the joint and survivor annuity to pay the premiums. That way, you may maximize your pension benefits while you are alive, and your spouse will receive insurance proceeds when you die that may be more valuable than what he or she would get under the joint and survivor annuity option. You may need a financial professional to help you assess whether this strategy is right for you. But you may be better off choosing the joint and survivor annuity. This might be the case if your assets are insufficient to meet your surviving spouse's needs, if you can't obtain the insurance coverage you need (or that coverage is too expensive), or if the difference between the higher-paying single life annuity and the joint and survivor annuity is small. This option would enable your spouse to receive pension survivor benefits after you die (usually a percentage of your full retirement benefit), as well as provide your spouse with guaranteed income until his or her death. Electing a joint and survivor annuity may also enable your surviving spouse to continue to receive medical coverage from your former employer after your death, if the plan allows. One final note: If you're married, most plans will only allow you to choose a single life annuity if your spouse waives the joint and survivor annuity. You and your spouse should discuss your options and agree on the one that will best meet the needs of both of you. This is a complicated decision, so get professional guidance before you make your choice. My husband is about to receive his pension. We've heard of "pension maximization." What is it? If your husband is participating in a traditional pension plan (also known as a defined benefit plan), his benefits must normally be paid in the form of a "qualified joint and survivor annuity" (QJSA). A QJSA is an annuity that pays a dollar amount (usually monthly) to your husband while he is alive, with at least 50% of that amount continuing to you after his death, if you survive him. However, if you consent in writing, your husband can waive the QJSA and elect instead to receive a single-life annuity. With a single-life annuity, payments are made over your husband's lifetime but stop upon his death. For example, if your husband receives just one payment after retirement and then dies, the single-life annuity would end and the plan would make no further payments. So why would you agree to waive the QJSA in favor of a single-life annuity, knowing that payments will stop at your husband's death? The main reason is that the single-life annuity generally pays a significantly larger pension benefit

8 than the QJSA. That's because the payments are designed to last for a smaller number of years--one lifetime instead of two. Pension plan participants who want to maximize their monthly retirement income are often tempted to choose the single-life annuity for this reason. However, most pensioners are also concerned about providing for their spouses if they should die first. "Pension maximization" is one technique for solving this dilemma. The way it works is that your husband elects, with your consent, to waive the QJSA and receive his pension benefit instead as a single-life annuity. You and he then use the additional pension income to purchase insurance on his life, with you named as beneficiary. If your husband dies first, the pension payments will stop, but you'll receive the life insurance death proceeds free from federal income taxes. The idea is that by coupling the larger pension payments with the purchase of a life insurance policy on your husband's life, you and he may be able to increase your total income during retirement, while also providing for your financial future if your husband dies first. Is pension maximization right for you? There are a number of factors to consider. Is your husband insurable? If not, pension maximization is not a viable strategy. How much will the life insurance cost? (If your husband is relatively young and in good health, the insurance premiums may be much more affordable than if he is older and/or in poor health.) How much more does the single-life annuity pay than the QJSA? The larger the benefits under the single-life annuity, the more income you'll have to pay the premiums for the life insurance policy. (Also make sure to factor in any cost-of-living adjustment the pension plan may provide when analyzing your payment options.) How healthy are you, and what is your life expectancy? What are the tax consequences? (Death benefits from life insurance are free from federal income tax, while pension benefits are typically fully taxable.) If your husband dies first, can you manage a large lump-sum payment? The pension maximization technique is not for everyone, but could be worth considering as you and your husband evaluate his pension benefit options. (Note: Any guarantees associated with payment of death benefits, income options, or rates of return are based on the claims-paying ability of the insurer. Policy loans and withdrawals will reduce the policy's cash value and death benefit.) My husband and I are getting divorced. How do we decide whose health insurance policy will cover the children? As parents, both of you will want to keep the best interests of your children in mind. That means you should compare your health plan with your spouse's health plan and determine which one offers the most comprehensive health coverage and flexibility in choosing health-care providers. Your ultimate decision will also involve other considerations, such as job security. If you and your spouse are eligible to participate in employer-sponsored group health insurance plans, which of you is more likely to remain employed? Expense is probably another issue you'll face. If your employer pays a larger portion of the premiums than your spouse's employer pays, your spouse may argue that you should cover the children under your health plan. If you have custody of the children, though, you may find the extra expense too burdensome. The issues of child support and child custody are quite relevant when you discuss health insurance coverage of the children. For example, if you have custody of the children, receive child support, and need your spouse to provide health insurance coverage for the children, you may be able to obtain a court order (if necessary) to ensure his or her compliance. This is known as a qualified medical child support order. You'll resolve the issue of health coverage--and many other issues--during your divorce settlement negotiations. Because state divorce laws may vary, you should seek advice from a divorce attorney before making any decisions.

9 My husband and I are divorcing after 30 years of marriage. Will I still be able to receive Social Security retirement benefits based on his earnings record after our divorce? Yes. If you already receive Social Security based on his earnings record, you'll continue to receive it as long as you live (or in some cases, until you remarry). If you don't receive Social Security yet, you can apply for a reduced benefit when you turn 62 or wait until your full retirement age if you want to receive an unreduced spousal retirement benefit. If you've been divorced for more than two years, you can apply as soon as your ex-husband becomes eligible for benefits, even if he hasn't started receiving them (assuming you're at least 62). However, if you've been divorced for less than two years, you must wait to apply for benefits based on your ex-husband's earnings record until he starts receiving his own benefits. You don't have to worry about losing your benefit even if your ex-husband remarries. Benefits for a divorced spouse are calculated separately from those of a current spouse. I'm getting remarried. How will this affect my Social Security benefits? If you're receiving benefits based on your own work record, your benefits will continue. If you're receiving spousal benefits based on your former spouse's work record, those benefits will generally end upon your getting remarried, but you may be able to receive benefits based on your new spouse's work record, or on your own. If you're a widow(er) under age 60, or you're disabled but under 50, remarriage ends any benefits based on the record of your deceased spouse. However, if you remarry after age 60 (or after 50 and are disabled), those benefits remain intact, unless you choose to receive the spousal allowance through your new spouse. If your second marriage ends as a result of death, divorce, or annulment in less than 10 years, you will again be eligible to collect benefits on your first spouse's record. Benefits paid to a disabled widow(er) are unaffected by remarriage. Note, too, that if you were the working spouse during your first marriage, your remarriage does not change the Social Security benefits paid to either your new spouse or ex-spouse. Because the rules surrounding payment of benefits are complicated, and depend on your particular situation, contact the Social Security Administration at (800) for more information.

10 Should I sign a prenuptial agreement to protect my assets when I remarry? Even if you never thought about signing a prenuptial agreement the first time you married, it's wise to consider it now, because marriage is often more complicated the second (or third or fourth) time around. You may have more assets now, or you may own a business or have children to protect. And because you've been through it before, you may be worried about the financial consequences of divorce or widowhood. A prenuptial agreement can ease your mind by spelling out what assets and liabilities each partner is bringing into the marriage, and by determining how money or property brought into the marriage or acquired during the marriage will be divided if the marriage ends either in death or divorce. A prenuptial agreement addresses some or all of these points: Assets and liabilities: What assets are you each bringing into the marriage? How much are they worth, and who owns them? Which ones will become marital property, and which ones will continue to be owned individually? Will gifts and inheritances be shared or separate? What liabilities do you have (e.g., back taxes or other debt)? Divorce: If you divorce, how will you divide assets brought into the marriage or acquired during the marriage? Will either spouse receive a lump-sum cash settlement or alimony? Estate planning: What will go to your children from previous marriages? What will go to children you have together? Special contributions of partners: If one spouse contributes to the marriage in a special way (e.g., limiting his or her career for the benefit of children or the other spouse), will that spouse be provided for? What if one spouse brings more liabilities to the marriage than the other? Because it's difficult to write an ironclad prenuptial agreement, don't try doing it yourself. Instead, you and your future spouse should hire separate attorneys to help you negotiate an agreement that will protect your financial interests without causing mistrust between the two of you. How can I find out whether my deceased husband owned any life insurance? If your husband left a letter of instruction, read it carefully. It may help you determine whether he had life insurance. A letter of instruction is simply a letter written by or on behalf of the deceased. It enables a surviving spouse or other person to locate important documents such as bank accounts, life insurance policies, safe deposits, or collectibles. If your husband died without such a letter and you are trying to discover whether he had life insurance, there are several things you can do:

11 Contact any family members whom your husband may have confided in. They may know if he had life insurance and from whom it was purchased. Ask your husband's lawyer, estate executor, banker, accountant, or financial planner whether they know of a life insurance policy. Talk to your husband's auto and home insurance agents. Often, consumers purchase one or more insurance products through the same agent. They may have sold your husband a policy or referred him to someone who did. Has your husband's estate been probated? If it has, check the court records for details of the estate. Sometimes, the life insurance policy will show up as an asset. Did your husband have group life insurance through an employer? Speak to his former employers to make this determination. Perhaps your husband had a safe-deposit box. You may want to contact some of your local banks to see if there is a safe-deposit box account in your husband's name. Look at any canceled checks, bank accounts, and credit card statements to see if your husband made any premium payments to an insurance company. Next, follow up with each company to see what the payment was for. Remember, the insurance company is not obliged to notify you about the life insurance policy even if you are the spouse. Typically, the insurance company does nothing until someone notifies it and files a death benefit claim. This is usually done by the owner (if not the insured), the beneficiary, or the estate of the insured. Although the above is no guarantee of success, some investigation will give you at least a chance of locating an existing policy. My husband just died. Do I have access to his accounts? Generally, if your name does not appear on the account, either as a joint owner with rights of survivorship, trustee (if the account is held in trust), or a beneficiary, you probably can't access the account unless authorized to do so by the probate court having jurisdiction over your husband's estate. Each state has its own laws dealing with this situation, and the applicable rules may differ from one state to the next. Even if you are named as agent in your husband's power of attorney with the right to access his accounts, that authorization ends upon the death of the person executing the power of attorney, namely your husband. My spouse passed away this year. When I file my taxes, what filing status should I claim? As the surviving spouse, you have several filing choices that may be appropriate. You may be able to choose married filing jointly, married filing separately, qualifying widow(er), or head of household. Married filing jointly: You can usually file a joint return for the year your spouse died. Generally, you'll have to file in cooperation with the executor or administrator of your spouse's estate. If you

12 remarry before year-end, you cannot file a joint return with your deceased spouse for that year. Married filing separately: To determine the most advantageous approach, you should figure taxes according to both the married filing jointly status and the married filing separately status. Qualifying widow(er): If you meet certain requirements (e.g., you support a dependent child for whom you can claim a tax exemption, and you have not remarried), you can file as a qualifying widow(er) in each of the two years following the year of your spouse's death. This status allows you to use the married filing jointly tax rates. Head of household: If you are ineligible to file jointly or as a qualifying widow(er), the head of household filing status may be possible. To qualify, you must provide support for a relative and meet several conditions. Regardless of whether you file a joint return or a separate return for your spouse, you must write "DECEASED" across the top of the return, along with your spouse's name and date of death. If you file a joint return and no personal representative has been appointed, write your (and your spouse's) name, address, and Social Security number in the regular name/address space at the top of the return. To sign the return, write "Filing as Surviving Spouse" in the space for your spouse's signature, then sign in the space for your own signature. If you are not filing a joint return, write your spouse's name at the top of the return and the personal representative's name and address in the remaining space. If a personal representative has been appointed, he or she must sign the return. Again, you must also sign if it is a joint return. For additional details, consult a tax professional.