Should you or your soon-to-be-spouse get out of debt before you get married? It’s quite interesting the phrase “for richer or poorer” is part of most wedding vows, as it implies, rightly so, that your spouse’s financial situation is in fact, a critical aspect of any marriage.
This is more relevant than ever, given the present situation of younger Americans today. Whether it’s from credit card debt or student loans, a large proportion of young Americans today have some form of debt. And as more people are becoming entrepreneurs, access to available capital can be hindered if you or your spouse has a heavy load of debt. This isn’t just an issue that dogs engaged couples and newlyweds either. It has implications for couples that have been married for a while as well.
This topic is quite complex and managing the ins and outs of laws and other situations involving debt and marriage simply can’t be covered by one post. However, we’ve outlined a few things every couple should know.
Where You Live Matters
We often get asked if one spouse is liable for the other’s debts. As with most cases involving debt and marriage – it depends. In the United States, most states follow “common law” property rules. This means that debts and property owned by one spouse stay their own unless the debt was for food, shelter, tuition for children, or some other family necessity. A number of states follow “community property” rules, where debts and property acquired by one spouse are owned by both. Note that these are gross generalizations for the sake of explanation, as every state is somewhat different from how they treat debts and property.
The community property states are:
- New Mexico
Ever the odd one out, Alaska lets spouses sign an agreement making their assets community property. Of course, very few spouses will take the risk or the extra step to do this.
To repeat- If you were married in a community property state, most debts incurred by one spouse during the marriage are owned by the couple as a whole. This holds true generally whether or not the other spouse was ignorant of the debt being signed.
Community Property Implications
As we mentioned earlier, debt is not the only thing couples share in community property states. As the name implies, property and income are also shared and owned equally. The major exception is gifts and inheritances, though different states have their own ways of addressing this potential loophole. In practice, the courts will decide on an equitable way to split the debts in case of a divorce or legal separation.
The major implication of this is, a piece of property acquired by one spouse could be targeted by a creditor to pay for a debt incurred by the other spouse, as the couple as a whole is seen as one entity. Property owned by the couple could also be used with no further consent needed by one party to get out of debt.
You Do Not Own Debts Incurred by Your Spouse Before Marriage
Thankfully, in the vast majority of cases, you will not assume debts your spouse assumes before you are married. This holds true regardless of whether you live in a community property or a common law property state. The biggest exception is if a spouse becomes a joint account holder after marriage. As always, different states will have different takes on the matter.
The Same Rules Apply to Same-Sex Marriages
Same-sex marriages, civil unions, and domestic partnerships that are considered equivalent to marriage will follow the same guidelines, as allowed by the laws of each state.
Getting out of debt is not always possible before marriage. In any case, debt should not necessarily be a deal-breaker when it comes to a couple’s pursuit of happiness. In any case, be sure to be transparent with your partner on all your finances to ensure your relationship lasts beyond any debt.