The word “marriage" brings up images of diamond rings, billowy dresses, and the promise of a long and happy life together.
Yet a marriage is also a legal and financial partnership. Like partners in a small business, married couples must manage money, make joint decisions, and communicate with one another about dozens of day-to-day issues.
A marriage is a legal relationship
When you get a marriage license or form a business, you create a new legal relationship. Marriage means your and your partner's money and property are connected in a way that they weren't before.
Marriage affects your legal rights in several ways:
- Property ownership. When you were single, you owned your bank account and anything you bought with it. When you're married, the general rule is that everything you earn or acquire during your marriage belongs to the two of you jointly (although there are exceptions and variations depending on the state you live in). This means that if you get divorced, you'll be splitting up most of what you own, no matter who earned the money to pay for it.
- Debts. In some states, you may be liable for your spouse's debts, even if your spouse's name was the only one on the paperwork.
- Inheritance. If you die without a will, your state's laws will automatically award about a half to a third of your estate to your spouse.
- Divorce and alimony. If you get divorced, a court may order the spouse who makes more money to pay alimony, or “spousal support," to the lower-earning spouse. In long-term marriages, alimony can be permanent.
- Death benefits. If your spouse dies, you may be eligible for certain benefits such as Social Security or pension benefits.
Like business partners, married couples can clarify or change these rules through legal documents, but many people don't—and later regret it. In contrast, business partners typically spell out their rights and responsibilities from the beginning in bylaws, operating agreements, and contracts.
Protecting yourself legally
The laws relating to marriage, money, and property are designed to protect you and your spouse. But they can also cause confusion and disagreement, or create a result you didn't intend.
For example, you may want to leave all your belongings to your spouse when you die, but your state's intestacy laws may give half to your parents or children. Contracts, wills, and other legal documents can change your legal obligations—so make your intentions known, to minimize the chance of misunderstandings and conflict.
Some key documents to consider include:
- A prenuptial agreement. A prenup is a contract that you and your spouse sign before the wedding. It typically specifies property ownership and division, and how (or if) alimony will be paid if you were to get divorced. A prenup isn't very romantic, but it can protect your assets and make things easier if you ever do split up.
- A will. If you don't have a will, you don't have any say in who gets your property after you die. Your state's laws could leave less than you'd like to some people and may leave out others altogether.
- A living trust. Trusts have many purposes, including preserving property for your heirs, avoiding estate taxes and probate, and helping you qualify for Medicaid later if you need nursing home care. In general, trusts help protect your property.
- Durable power of attorney. A durable general power of attorney names someone to make financial and legal decisions for you if you become unable to handle them yourself.
- Health care advance directives. Advance directives, including a power of attorney for health care and a living will, communicate your health care choices if you are too ill or incapacitated to communicate them yourself. A health care power of attorney names someone to make health care decisions for you, and a living will documents your wishes about end-of-life care. These documents make your preferences clear and can ease the strain on your family in a difficult time.
Smart business owners have documents that anticipate the day when their business will close or a partner will leave or die. When married couples do the same, they protect themselves and minimize the chance of unexpected and unwelcome financial consequences down the road.