We’ve talked about it before here on the Divorce Lawyers for Men blog, but it is worth repeating: Divorce is not an ending but the start of a new chapter in life.
For many people, that new chapter includes a second wedding, and if you’re getting married again you are in good company. On average, 40% of people who exchange vows each year have been married before.
Caught up in the excitement of the wedding and the honeymoon, the last thing most couples want to think about is updating financial documents, but while it may be a boring task it’s important to build your marriage on sound financial footing. Uncle Sam is very interested in your marital status and you want to make sure everything is correct for your taxes.
Here are 3 tax issues that are commonly overlooked in the excitement of a second marriage:
1. The One Day Rule
While some people choose January 1st as their wedding day, most people get married on some other date throughout the year. Most newlyweds are therefore only married for part of the tax year. How does the IRS classify the rest of the year? If you get married in July are you only 50% married on your taxes for that year?
Thankfully the IRS has a simple solution for this conundrum. Whatever your marital status is on the final day of the year will be used as your status for the entire year. Whether you get married on January 2nd or December 31st, the IRS will put you down as hitched for the whole year on your taxes.
When planning your wedding, it is good to take into consideration that your new status will be retroactive for the tax year. Keeping this in mind, since you may want to change your income tax withholding even before you get married. Talk to a tax accountant to go over all your financial options.
2. Update Your Beneficiaries
What do life insurance policies, 401(k) plans, and IRAs all have in common? You need to name a beneficiary for each. Who is listed on your plans right now? Your parents, one of your siblings, or is your ex-wife’s name still there. It’s okay to admit that your ex-spouse is still on the paperwork, but it’s not okay to leave it that way. You can wait until you get back from your honeymoon, but don’t delay any longer than that. Now that you have a new wife, make sure all the paperwork is updated with her name.
3. Change Your Address
A second marriage often starts with a new life in a new home. Even if you and your new spouse both owned houses when you met, you may decide to sell them and find a new place together. This allows a fresh start without reminders of previous spouses. If you do move after the wedding, make sure to update your address. It is especially important to make sure your employer has the correct address for your W-2. While everything else may be done online, many employers still mail out paper W-2s. Save yourself the hassle of scrambling to find it at tax time by updating your records soon after the wedding.
Keep these three items in mind and you will be on the right track after you get remarried. Of course these aren’t the only tax issues you need to remember. Look for even more tax items everyone forgets in a second marriage in a future blog article.