Marriage Debt and Accounts

There is so much to know and so many lies to be reveled concerning how debt will be reviewed once married.  The first myth I want blow is that your debt becomes his/her debt.  That must be put into context, yours spouses debt is only yours when you pay them together monthly from your joint budget.  If your spouse had credit card debt, tax debt, real estate debt, car debt, and so on prior to marring you then legally that debt is not your financial responsibility.  That is good news if your spouse passes prior to the debt being cleared, you are not responsible unless your name is listed as co-owner.  The draw back is they can come after the estate, if there is one and the spouse is listed. 

The second myth is your credit takes on the same effects as your spouses.  The truth is your credit doesn't become his/her credit unless you are purchasing a large dollar item together.   They need to view both your reports to make a decision, but it still is not the same information.  It doesn't mean that prior debt has now been absorbed by you, it just means they are looking at your numbers together to see who is the weaker link and who should be named first, which is the person with the higher FICO score.If you and your spouse do not share credit than your scores will be different and will require different attention.  Sharing credit means you made credit application requests together.  If a purchased items is only in one persons name than the other will not benefit from the on time payment, nor will they suffer for the late payments.  This is why it's important to know before purchasing large dollar items who should apply or both.  

Another myth is having a joint account requires both signatures to pull out all the money, it may to close the account, but not to move the money. You will need to verify that with the bank prior to adding a person or opening the account.If one spouse owes creditors and a bank levie is approved then a joint account can be seized.  In the event that happens there are steps you can take to clear it up, but be prepared to wait.  So, didn't think that just because your name is on it as well they can not accomplish this.  You would have to go through legal means to get it resolved as far as what belongs to the other spouse.  Also, all names on an account at the same financial institution allows for right of off set for the bank.  Meaning, if one account holder over draws an account and their name is listed on another they can clear the negative balance with the position account; as long as the funds are available.  If there is the possibility of this issue arising you may want to consider having separate accounts until it is resolved.  You will always have the option of adding your spouse to your account as a beneficiary.  Meaning, they will have access to the money in the event something happens to you.

The same applies to tax liability that was already existing prior to the marriage and that which occurred during the marriage.  You are only financial responsible for tax debt when you file joint, otherwise you are only responsible for your own debt.  Filing a joint return says that you accept responsibility for that tax year only, but there is a way to avoid this by filing separate or you will have to seek advice from a tax attorney to prove the tax debt was not personally yours.   I will get more in dept with this topic in a later post.

I hope you get the jest of what I am saying when it comes to making financial decisions.  You must know your rights as well as know how to utilize credit.  I have a blog coming soon to explain why it is important to establish credit.