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Janice France-Pettit: Finances for couples

Union Bank

Posted: March 12, 2010 11:07 p.m.
Updated: March 13, 2010 4:55 a.m.
 
Couples have important decisions to make regarding how to manage their finances. Basic choices, such as opening a joint checking account, filing jointly or separately on your taxes and determining how you will invest in the stock market are a few of the decisions you are likely to face.

Since there are no set rules on how to arrange your finances as a couple, here are tips that may assist you.

Assets
It may be beneficial to combine your finances. For example, when you buy a new home you are usually required to have two sources of income to qualify for the purchase; pooling your funds together may be necessary. Also, you may receive greater tax breaks on the purchase of large expenses, including a home, when you file together.

However, you may consider keeping select portions of your property separate. For example, if you obtained expensive assets before entering the relationship, it may be wise to keep them registered under your name. Also, if your partner has previous or existing debt it might be smart to keep your credit accounts separate.

Checking accounts
Before you discuss opening a joint checking account, it may be beneficial for you and your partner to obtain a copy of your respective credit scores. Knowing your partner's financial history and if he or she has existing debt may help you assess if combining funds would be the best option. Be aware that once you sign your name on your partner's bank accounts, you may assume his or her existing debt. This may impact your credit score.

A joint account usually allows couples to have full access to money in order to pay for household expenses such as mortgage payments or other bills. Also, in an unpredictable situation, such as the death of a spouse or an accident, having a joint checking account allows the surviving spouse to access funds. Opening a joint checking account does not mean you have to invest 100 percent of your income into that account. You may choose to maintain a personal checking or savings account for vacations, gifts or other personal needs.

Taxes
Many couples are uneasy about filing joint taxes because combining their incomes might push them into a higher tax bracket, which results in a higher tax rate. Normally, if you face fewer penalties filing as a single person, it is recommended that you file independent of your spouse.

Filing joint taxes does have certain benefits, like the marriage bonus that usually allows you to pay fewer taxes than a single filer. The marriage bonus works when a couple has unequal levels of income because the lower income will usually cause higher income to be pushed into a lower tax bracket. Also, filing jointly will allow you write off $500,000, from the profit of a home sale, opposed to the $250,000 singles can claim.

Saving
Discuss saving habits with your partner. If one person is an aggressive saver and the other an equally aggressive spender, this could lead to disagreements regarding finances. Agree on a savings plan, and stick to it in an effort to build a safety net to help protect you and your partner during tough times or allow you to save for large purchases, or even a vacation.

There are many things to consider when creating a solid financial foundation for your relationship. Planning and preparing for your life together today may help you be financially stable in the future.

The foregoing article is intended to provide general information about filing tax returns and is not considered financial or tax advice from Union Bank. Please consult your financial or tax adviser.

Janice France-Pettit is a senior vice president and regional manager for Union Bank, overseeing the Simi Valley, San Fernando Valley and Antelope Valley regions. Her column reflects her own opinion and not necessarily that of The Signal.

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