After the wedding: seven financial matters newlyweds should check

Getting married changes your financial situation more than many happy couples initially imagine, mean-ing it makes sense to use this important milestone as a reason to reexamine your finances.

You should sit down together and check your tax brackets, declarations for exemption, insurance, bank and securities accounts and powers of attorney. It’s the best way to avoid duplicate costs, take ad-vantage of benefits and create a solid foundation for your new life together.

1. Tax brackets and filing taxes

Married couples and registered partners are usually treated as a single unit for tax purposes. Many couples start out with the German tax bracket IV/IV, which makes sense as long as both partners are earning roughly the same amount of money.

Filing jointly, meaning that the income from both partners is added together for tax purposes, usually provides a financial benefit to couples. As part of “Ehegatten-Splitting” (spousal splitting), the tax office then calculates the joint taxes payable from the total marital income. This is particularly beneficial if one person in the couple earns much more than the other.

Your income and your individual situation will determine which combination is best for you. This is par-ticularly true if you are expecting to be drawing parental allowance, unemployment or other wage sub-stitutions, as the amount you receive in those cases is based on your net income.  

2. Declaration for exemption

If you have invested any money, you should also take a look at your declarations for exemption. Tax-exempt investment income is doubled for married couples and registered partners, for a total of 2,000 euro per year.

This is particularly useful if one partner has more investment income than the other, as the joint exempt amount can be split accordingly. Using the exemption, interest or dividends remain tax free up to the exempt amount.

However, it is important that you submit a new exemption order to your bank in good time. If you don’t, you may have to pay unnecessary flat rate withholding tax.

3. Gifts and inheritance

Marriage also changes how gifts and inheritance are handled. Married couples have significantly higher tax exemptions than partners who are not married.

This can be very important if, at a later date, you want to transfer assets to your children in the form of cash, securities or real estate. Even though matters of inheritance may seem a long way away for the newly wed, it makes a lot of sense to get your ducks in a row early on. The larger the asset pool is, the more important it is to plan in good time in order to avoid high taxes on gifts or inherited wealth.

4. Insurance

After you get married, you will want to examine your existing insurance policies. Some policies can be changed into joint policies, while in other cases, adding your spouse’s name is enough. This prevents duplicate insurance and saves on policy fees.

This is often the case for:

• Private liability insurance
• Household contents insurance
• Legal expenses insurance
• Health insurance for abroad

It’s also worth checking if you can change the beneficiaries on existing policies, especially when it comes to life insurance, private pension plans or accident insurance.

5. Joint account

Many married couples decide to open a joint account, which can be used to pay for shared expenses such as rent, groceries or insurance. As a general rule, this makes it easier to keep track of expenses.

This account is usually what is known as an “either to sign” account, in which each account holder has the right to take account actions individually.

Whether or not a joint account is right for you will depend on how you wish to organise your finances. Some couples have a single joint account. Others keep their individual accounts while also opening a joint account for shared expenses.

6. Power of Attorney

One important issue is often overlooked: married couples do not automatically have the right to access each other’s bank accounts.

So if each partner maintains their own account, it is important to talk about what will happen in an emergency. Making sure that each partner has power of attorney over the other’s account or invest-ments may be the most sensible option, allowing the non-account holder to act if needed.

Your bank can provide the relevant forms.

7. Financial protection for your family

Joint financial obligations often grow once you enter into marriage, particularly if you are planning on having children or taking out a larger loan. You should think carefully about whether or not you will require financial protection, such as term life insurance, in these circumstances. It can help to protect the other partner or whole family if one of you is no longer able to earn an income.

It is also important to have a plan in the event of illness: durable power of attorney can help you de-termine who is allowed to make legal decisions for you if worst comes to worst. This way, couples know that someone they trust is making the decision. Having a notary certify the durable power of attorney is not always necessary; however it may be required for the person with power of attorney to take action at the bank. If in doubt, ask your bank to clarify.

If you are uncertain what options will work best for you, make an appointment with your bank to discuss it or speak to a tax advisor.