Tax Issues That Should Be Addressed in a San Diego Prenup Agreement
There is nothing less romantic than tax planning. However, if you are planning a wedding then you may save a substantial amount of money in the long run by meeting with a financial advisor to discuss tax issues. My last post provided an overview of prenuptial laws in California and briefly touched on reasons why San Diego couples may choose to sign a prenuptial agreement. In this post I will discuss how a prenuptial agreement may be a necessary part of your pre-marital tax planning.
A prenuptial agreement can protect one California spouse from the other’s back tax debt
Parties will typically begin filing joint tax returns after they get married. There are situations, however, where it may make more sense for a couple to file their tax returns separately. If your spouse owes back taxes, and you file your tax return together, then the IRS is able to seize any refund otherwise due to the non-indebted spouse. When filing a joint tax return, both spouses become responsible for all information listed on the tax return and for all taxes owed for that year. When you file together, if one spouse does not pay their complete tax debt, then both spouses become responsible. Proper pre-marital planning can prevent potential problems.
A prenuptial agreement can protect a spouse if the other has a messy tax situation. By establishing property as separate, and placing in the agreement that all tax returns will be filed separately, then the spouse who is not in tax debt will be protected. This will minimize the couple’s liability should the IRS ever attempt to seize the non-indebted spouse’s tax return. Consulting with an attorney who understands these issues will assist California residents from having problems with the Internal Revenue Service.
Prenuptial agreements assist San Diego residents with tax planning when they are ill or getting married later in life
There are other instances in which tax planning, and having a prenuptial agreement, may be important to financially protect a San Diego couple. While most couples enjoy tax benefits from marriage, some couples may experience a “marriage penalty” once their incomes are combined and they are pushed into a higher tax bracket. While some believe this is only a problem for the wealthy, for individuals whose only income is Social Security or other small sources, there are times when income suddenly becomes taxable. Other individuals who may wish to meet with a financial advisor prior to marriage are those who have large medical bills and expenses, or who may be receiving one-time windfalls, such as a large inheritance.
If you have questions regarding whether or not a prenuptial agreement is right for you, we will be happy to assess your needs during an initial consultation. For those who have complicated tax issues, we may refer clients to a reputable tax consultant. Once financials have been thoughtfully decided on then our office may draw up an agreement for both people to sign so that all assets are protected. Contact our San Diego prenuptial agreement attorney today.