Love and marriage used to be inseparable, but a growing number of Americans are delaying marriage into their 30s, with some couples skipping the nuptials altogether in order to protect their wealth. While it's not a lack of love, the potential cost of marriage just doesn't make sense to some.
In the 1970s, eight in 10 Americans were married by age 30, according to the U.S. Census Bureau. In 2017, that age increased 15 years with eight in 10 Americans being married by the time they're 45-years-old.
While there are a variety of reasons for the delay, finances – from both a legacy planning perspective and a financial security perspective -- have become a big part of the conversation about whether or not to tie the knot, explains Malia Haskins, vice president of wealth strategies at RBC Wealth Management in Minneapolis.
“When you get married, that comes with certain statutorily imposed entitlements or advantages," says Haskins. But there are also potential disadvantages. “The financial implications are certainly something couples are scrutinizing as they decide whether or not to wed."
Waiting to be in a better place financially
Cyndy Ranzau, a wealth strategist at RBC Wealth Management, says with societal attitudes surrounding marriage evolving, many young Americans — specifically Millennials — are taking the time to gain their financial footing.
“They're delaying because they don't feel financially secure themselves," says Ranzau. “So the thought of going out on their own and being responsible for another person, and maybe starting a family and being responsible for them, feels overwhelming."
For young Americans grappling with the high cost of continuing education, there's also a clear benefit to putting off marriage. “Once they get married, their spouse's income and assets are included in the financial aid calculation," says Ranzau.
Alan Wolberg, senior vice president and senior wealth planner at City National Bank, says getting married when you're older also makes more sense from a tax and estate planning perspective.
If you're making good money when you're young, it may be more tax efficient to file as an individual or separately, even if you do marry. "It may be better to file separately because you may avoid the marriage penalty if you are earning a significant annual income and, thereby, end up paying less in terms of income taxes," he says.
Once you've accumulated significant wealth later in life, “Being able to combine your estate tax exemption amounts as a married couple may outweigh what you owe as a married couple paying income tax."
Postponing marriage to help protect assets
“If one of the partners has a significant amount of debt ... the other may delay marriage as a result," says Ranzau. This would protect one partner's assets from being attached to a claim against the other partner.
On the other hand, if one spouse stands to inherit assets they may decide to wait until after the inheritance is received to marry. That's because in some states, an inheritance is considered marital property unless it's held in trust for the benefit of the inheritor.
“If an individual were to be married when they receive the inheritance and then divorce, their spouse may walk away with half of the inheritance," Ranzau says.
Hesitating because of income inequality
Wolberg says he sometimes comes across situations where couples delay tying the knot because one partner is the key earner.
“If [one person] is making all the money they often like to keep it separate," he says, adding that they're willing to share with their partner and support them, but they do not necessarily want to co-own assets officially.
While that may not sound terribly romantic, it's a decision that could prove to be wise should the couple marry then divorce. Under most state laws, in the event of divorce, spouses are entitled to a share of the couple's combined property.
Even if you agreed on the front end of the marriage that a certain asset, such as an inheritance, is yours and yours alone, if your use of those assets comingles the inheritance with marital assets -- for instance, if you use some of the funds from an inheritance to buy the marital home -- it becomes more difficult to distinguish whether it should remain separate or if it has been converted to marital property. It can get complicated quickly in the event of a messy separation further down the line, says Haskins.
“Prenups are not bulletproof," she says. “The entitlements that marriage legally brings to a relationship often muddy the water and may for some people be prohibitive."
Owning significant real estate
The U.S. Federal Government's State and Local (income) Tax Deduction (colloquially known as the SALT provision), which changed January 1, 2018 under the Tax Cuts and Jobs Act (TCJA), has stirred even more discussion between couples about the financial disadvantages of marriage, including Haskins and her fiancé.
“Under TCJA the SALT limitation is $10,000 for state and local property and income taxes," says Haskins. Under the provision, the cap is $10,000 for individuals or, if you're married, $10,000 combined. In theory, it makes sense given that many married couples own property together.
But for Haskins, it feels a bit like a marriage penalty, as she and her fiancé both own two pieces of real estate separately. Instead of being subject to the SALT limitation of $10,000 each, as a married couple we will be limited to $10,000 combined. “Is it going to make or break whether or not we get married? Probably not," she admits.
Protecting benefits and support for children
For those with children from a prior relationship, remarrying carries its own share of interruptions to the financial status quo. For example, any financial aid a child receives for education purposes could be recalculated with the new spouse's assets factored in, if the assets are owned jointly, which could reduce the amount of financial aid. Child or spousal support may also be cut off or reduced if they remarry, says Ranzau.
“I think a lot of it comes down to, how does marriage impact everything else?" she says.
Retirement accounts like IRAs or 401(k)s can also get complicated in second marriages, according to Haskins.
She recently encountered a situation with a client where the husband wanted to direct 50 percent of his IRA to his kids when he died and 50 percent to his wife. “Because 100 percent wasn't going to his spouse, in order to accomplish that, he had to obtain his spouse's written consent under Wisconsin law," says Haskins.
The wife wouldn't agree and it became a complicated situation — the sort of situation some couples looking at a second marriage may want to consider.
“You can do postnuptial agreements after the fact, and you can certainly implement planning to help protect and accomplish the goal of keeping things separate," says Haskins. “But only if you agree… if you're not in agreement then things can go sideways."
Don't do it for taxes, do it for love
While many will argue that relationships - and finances, for that matter - are far more complicated today than in the past, marriage has always come with financial trade-offs for couples both young and old; however, Wolberg says, "At the end of the day, my belief is very simple: You get married because you love each other, not because of taxes."