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I've been with my SO for forever, almost 20 years, and we both feel that getting officially married is just another piece of paper to have. However we recently moved to CA where she'll be attending grad school while I'm working making around $130K. I'm wondering if we're better off getting married so we can file jointly and save money on taxes, I'm thinking we could save at least around $10K. Not sure if it matters but for the moment we have no intention of purchasing any property as we will probably relocate once she's done with school. We have cash sitting to pay for her grad school and are debt free.

What are some pitfalls to this clearly air tight plan?

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Marriage for loss in California, it seems.

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Divorce.

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Pitfalls?

So basically after you move to CA and find one of her Grad friends prettier and can't do much about it without losing all your savings!

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Say we open a joint account pay joint stuff out of it and keep separate accounts. Now lets go down the divorce route, and assuming no kids for simplicity sake, what would she get? Let's also assume that I will fund this joint account while she's in school, although that wouldn't be the case since she has the money in her account to pay for school and our daily expenses.

Once she graduates her earning potential will be equal or higher than mine. I realize the divorce rate is high in general, but it's hard to turn down what looks like free money?

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If you both feel its just another "piece of paper" then I would say no dont do it. 

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By now, you should know whether you are going to spend the rest of the life with your SO. If yes, get married and save on taxes.

But BTW, you can play games with one spouse not working. So theoretically, she had no income - can she qualify for some of the low-income benefits? What about education credits? [Sorry kids have graduated - don't remember the exact rules].

Here is another interesting one - if you have any appreciated stock and you gift it to her, she can then sell with 0 long term capital gains rates. Also, if you are not married in 2018, and she had 401K etc., might be a good year to roll that stuff over into Roth variants. Sure a penalty is there but very little in taxes in 2018 for lots more fun later.

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Married for profit. Funny guy... I needed a laugh. Isn't interesting that people who are together for years, have a family, build assets together, etc. decide to get married.. Then, after two or three years, it falls apart. No, not me.. We can use Brad and Angelina Jolie as the example.

If you are wise, you should keep it status-quo. That is, unless you live in one of the 10 States which recognize common law marriage. If you do, you're already married.

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ericfwf said:   I've been with my SO for forever, almost 20 years, and we both feel that getting officially married is just another piece of paper to have. However we recently moved to CA where she'll be attending grad school while I'm working making around $130K. I'm wondering if we're better off getting married so we can file jointly and save money on taxes, I'm thinking we could save at least around $10K. Not sure if it matters but for the moment we have no intention of purchasing any property as we will probably relocate once she's done with school. We have cash sitting to pay for her grad school and are debt free.

What are some pitfalls to this clearly air tight plan?
Presumably her going to grad school will advance her career and provide higher paying job opportunities, not just for personal satisfaction, right? If she's gonna make anything on top of your $130K, you'll likely be paying a marriage penalty. In that scenario, the only way this would be "for profit" is if you had an air tight prenup and a divorce right after she gets a job.

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I do see us spending the rest of our lives together and having kids in the future. She has $50K in trad IRA and 401K that she could do a conversion during year 1. I don't have any appreciated stocks outside retirement accounts. Don't live in one of 10 states that recognizes common law marriage. In a sense many are suggesting I pay $10K per year for the risk of a future divorce, but what I'm trying to understand is what can happen in case of a divorce if we each keep our accounts separate, assuming no kids since child support adds to the complexity.

I find it somewhat ridiculous that people green a thread that gives them a profit of $150 in a CD which they then need to pay tax on yet when I'm suggesting that I can clean $10K tax free everyone is basically saying not to do it. Obviously one has more risks than the other but still it doesn't seem right.

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ericfwf said:   
I find it somewhat ridiculous that people green a thread that gives them a profit of $150 in a CD which they then need to pay tax on yet when I'm suggesting that I can clean $10K tax free everyone is basically saying not to do it. Obviously one has more risks than the other....

round here we call that an "understatement"

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ericfwf said:   what can happen in case of a divorce if we each keep our accounts separate, assuming no kids since child support adds to the complexity.
 

  IANAL
CA is a community property state. In general, any marital property (that includes your income while married) is nominally split 50-50. It doesn't matter whether you keep separate accounts or joint accounts.

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Greatness said:   Married for profit. Funny guy... I needed a laugh. Isn't interesting that people who are together for years, have a family, build assets together, etc. decide to get married.. Then, after two or three years, it falls apart. No, not me.. We can use Brad and Angelina Jolie as the example.

If you are wise, you should keep it status-quo. That is, unless you live in one of the 10 States which recognize common law marriage. If you do, you're already married.

  You seem rather cynical... and it is understandable just looking at what happens to lots of people.  But it is hardly newsworthy to report on the other situations.

I doubt that I would have been nearly as motivated to be as successful as I have been (a relative term) had I not been married.  So, while I definitely had significantly higher expenses as a result of being married, I had a significantly higher income because of the motivation, planning, and persistence that I have had.

OP, if you're going to be together anyhow, it really doesn't matter one way or the other.  There are financially lucrative ways to benefit from either situation depending on what your goals are and the income levels.

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ericfwf said:   I do see us spending the rest of our lives together and having kids in the future. She has $50K in trad IRA and 401K that she could do a conversion during year 1. I don't have any appreciated stocks outside retirement accounts. Don't live in one of 10 states that recognizes common law marriage. In a sense many are suggesting I pay $10K per year for the risk of a future divorce, but what I'm trying to understand is what can happen in case of a divorce if we each keep our accounts separate, assuming no kids since child support adds to the complexity.

I find it somewhat ridiculous that people green a thread that gives them a profit of $150 in a CD which they then need to pay tax on yet when I'm suggesting that I can clean $10K tax free everyone is basically saying not to do it. Obviously one has more risks than the other but still it doesn't seem right.

  If a profit of $150 would put half of the rest of their assets at risk, that deal would get red too.

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If everything works out, then great! If not, you could be screwed. So just like regular marriage.

If you decide to go down this route, keep it as a business transaction. Married by the court, no ceremony, pre-nup to cover your retirement accounts. If everything works out in 3 years when you've moved to your actual place of residence, then you can have the big ceremony (if that's what you want). No one needs to know you've actually been married for awhile.

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This may be a finance forum full of cheapskates and deal seekers, but that doesn't mean that we all look at marriage first and foremost as a financial transaction or business partnership. Personally, I am of the opinion that if your main motivation behind getting married is to improve your financial situation, you are not getting married for the right reasons.

I do see us spending the rest of our lives together and having kids in the future.This is the "right" reason to get married that I am talking about. Sadly, it came in your third post and is immediately followed by useless details about retirement funds, so it might not be high enough on your priority list to have a strong enough effect on the relationship.

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I'd just examine all scenarii.

1) everything goes as planned and you basically save $10k/yr in taxes. After that, assuming both of your incomes are comparable, filling jointly is about the same as filling single x 2 so overall a good deal for both.

2) divorce happens. So you'd have some tax savings until then. You finance her grad school expenses + living expenses prior to divorce. You'd have paid those regardless if living as domestic partners so it's a wash. Compared to not being married, you still have the tax savings. As far as divorce goes however, both of you will be losing half of the assets gained since marriage. If divorce happens sufficiently long after she graduates and gets a high-paying job however, that may not be such a loss. If it happens right after grad school, it's likely a pretty significant hit. Worst case scenario: she files for divorce right after you're done paying for her grad school. That would assuredly be a larger loss than the tax savings.

Solution: setup a prenup where she gets nothing of the assets accumulated while she's in grad school, except for half of the tax savings in case of divorce. That mimics (except for tax benefits) what would happen if you waited to marry until she graduates.

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so your entire motivation, according to your post, is to save money on tax. how much is that? and you have no current intention of buying property, did you ever have a current intention of getting married? my point is that intentions change. so add that to your decision matrix.

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Dus10 said:   
Greatness said:   Married for profit. Funny guy... I needed a laugh. Isn't interesting that people who are together for years, have a family, build assets together, etc. decide to get married.. Then, after two or three years, it falls apart. No, not me.. We can use Brad and Angelina Jolie as the example.

If you are wise, you should keep it status-quo. That is, unless you live in one of the 10 States which recognize common law marriage. If you do, you're already married.

  You seem rather cynical... and it is understandable just looking at what happens to lots of people.  But it is hardly newsworthy to report on the other situations.

I doubt that I would have been nearly as motivated to be as successful as I have been (a relative term) had I not been married.  So, while I definitely had significantly higher expenses as a result of being married, I had a significantly higher income because of the motivation, planning, and persistence that I have had.

OP, if you're going to be together anyhow, it really doesn't matter one way or the other.  There are financially lucrative ways to benefit from either situation depending on what your goals are and the income levels.

  How does marriage equal motivation?  A person should be motivated because of themselves, not because of a legal obligation.    

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meade18 said: ...you are not getting married for the right reasons.We're both crazy about one another and are just as in-love as we were over a decade ago, if not more. We both feel that going to the courthouse and getting a piece of paper is not what makes a relationship official. The reason I created this thread is because I want to know as much information as I can from the start before just signing things so if later something happens I can't say I had no idea that this is how things could turn out. I lose nothing by educating myself and her and asking questions prior to signing.Shandril said: 2) ...As far as divorce goes however, both of you will be losing half of the assets gained since marriage.So retirement accounts that existed before the marriage will not be affected? If one receives an inheritance, during the marriage, will that be split as well assuming it is kept in a completely separate account?miserly said: so your entire motivation, according to your post, is to save money on tax. how much is that? and you have no current intention of buying property, did you ever have a current intention of getting married? my point is that intentions change. so add that to your decision matrixWe don't plan on staying in CA after she's done with school so it's hard to justify buying property here. See first response regarding intention of marriage.

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Greatness said:   
Dus10 said:   
Greatness said:   Married for profit. Funny guy... I needed a laugh. Isn't interesting that people who are together for years, have a family, build assets together, etc. decide to get married.. Then, after two or three years, it falls apart. No, not me.. We can use Brad and Angelina Jolie as the example.

If you are wise, you should keep it status-quo. That is, unless you live in one of the 10 States which recognize common law marriage. If you do, you're already married.

  You seem rather cynical... and it is understandable just looking at what happens to lots of people.  But it is hardly newsworthy to report on the other situations.

I doubt that I would have been nearly as motivated to be as successful as I have been (a relative term) had I not been married.  So, while I definitely had significantly higher expenses as a result of being married, I had a significantly higher income because of the motivation, planning, and persistence that I have had.

OP, if you're going to be together anyhow, it really doesn't matter one way or the other.  There are financially lucrative ways to benefit from either situation depending on what your goals are and the income levels.

  How does marriage equal motivation?  A person should be motivated because of themselves, not because of a legal obligation.    

  My motivations have nothing to do with legal obligations... how could you possibly arrive at that conclusion?  Being married, to someone that I care about and have some desire to constantly impress is what motivated me (those indeed are internal traits, so indeed... I am motivated by myself).  Kind of trying to force things a bit too much?

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ericfwf said:   We both feel that going to the courthouse and getting a piece of paper is not what makes a relationship official.
Then why do it? If it's simply for the financial benefit, then we're back to my original opinion - you're getting married for the wrong reasons. Without knowing much about you, you have anywhere from a 20% to 40% chance of getting divorced. Since the financial impact of the marriage is in the forefront of your mind, figure everything positive with only a 70% expected value. And figure all the negatives that could arise from a divorce with a 30% expected loss. Then look at the two numbers and decide if it's worth it.
  

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Don't forget the social security aspect of it. I think you can collect 50% of your spouses social security benefits if you've been married for 10 years.

Also don't take too much stock on what gets reported in the news. Car crashes and pedestrians getting killed get reported all the time, but we still cross the street and we still drive cars. Sometimes what gets reported is the exception not the rule, but people make the opposite conclusion.

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Dus10 said:   
Greatness said:   
Dus10 said:   
Greatness said:   Married for profit. Funny guy... I needed a laugh. Isn't interesting that people who are together for years, have a family, build assets together, etc. decide to get married.. Then, after two or three years, it falls apart. No, not me.. We can use Brad and Angelina Jolie as the example.

If you are wise, you should keep it status-quo. That is, unless you live in one of the 10 States which recognize common law marriage. If you do, you're already married.

  You seem rather cynical... and it is understandable just looking at what happens to lots of people.  But it is hardly newsworthy to report on the other situations.

I doubt that I would have been nearly as motivated to be as successful as I have been (a relative term) had I not been married.  So, while I definitely had significantly higher expenses as a result of being married, I had a significantly higher income because of the motivation, planning, and persistence that I have had.

OP, if you're going to be together anyhow, it really doesn't matter one way or the other.  There are financially lucrative ways to benefit from either situation depending on what your goals are and the income levels.

  How does marriage equal motivation?  A person should be motivated because of themselves, not because of a legal obligation.    

  My motivations have nothing to do with legal obligations... how could you possibly arrive at that conclusion?  Being married, to someone that I care about and have some desire to constantly impress is what motivated me (those indeed are internal traits, so indeed... I am motivated by myself).  Kind of trying to force things a bit too much?

  
I wish you the best of luck with that.
   

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ericfwf said:   
Shandril said: 2) ...As far as divorce goes however, both of you will be losing half of the assets gained since marriage.
So retirement accounts that existed before the marriage will not be affected? If one receives an inheritance, during the marriage, will that be split as well assuming it is kept in a completely separate account?

This varies per state but in most, regardless of community state status or not, there is a distinction between marital property and separate property. An inheritance or some real estate starts out as separate property and  could be kept as a separate property even if gained during marriage as long as you don't commingle it with marital assets. Any time it'll touch marital assets (getting retitled, receiving payment/distribution from joint ownership accounts, etc, it'll become a marital asset.  Comingling would happen if you make improvements, pay mortgage or maintenance to some separate real estate property using marital funds.

For retirement accounts, if gains are only through passive appreciation, they should remain separate. For simplicity, best would be to open separate retirement accounts for contributions going forward after marriage so that appreciation in the pre-marriage retirement account is clearly passive. To be sure, consult your state laws on the treatment of those.

And to plan ahead, all this like the treatment of potential future inheritance can be part of a prenup agreement...

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fwuser12 said:   CA is a community property state.

Marriage for loss in California, it seems.

Years ago a guy from NYC told me there is a street of small ethnic stores there where an American citizen can be paid cash sometimes 12k depending upon country to marry. For a poor guy, this might be profit, but I don't know any details or if it is true.  

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