![]() While your attorney might be able to object to the disclosure of your spouse’s financial data as inappropriate, there may have to be negotiations over what items are redacted and which should not be. If you file joint tax returns then your spouse’s financial data might also be exposed. For example, disclosures on your income tax return may be relevant to the actual claim in issue, or relevant to settlement negotiations. If you are sued, and you have been filing joint income tax returns, your adversary may request copies of your income tax returns. From an asset protection perspective, you might want to file separate income tax returns. While that may be true, that is only part of the story. Pooling income taxes by filing a joint return is recommended as a means to reduce income taxes for many but not all people. Pooling Finances By Filing Joint Income Tax Returns: Good or Bad? Again, consider all the implications to how an asset is owned, not only whether you would like to own it jointly as a couple. ![]() ![]() If so, you might want to have a limited liability company (“LLC”) formed to own the property to provide some protection for your other assets if a tenant might sue. Another consideration is if that second home is rented. Using a revocable trust to own the house, or each of your trusts to own half of the house might be an option worth discussing. But on the second death heirs might still face a second probate proceeding. If you change the title of a vacation home in another state to join, the survivor will inherit it on the first spouse to die passing. Part of the discussion should be not only about what to pool or not but also about the other implications of each asset involved. If that second home is in a state other than in which you live, on death you could face probate of that asset in that second state (called “ancillary probate”). In the story the couple owned a second home. You might still proceed, but isn’t it better to know what you are getting into? None of the advisers in the article even mentioned the matrimonial implications to pooling. Speak to an attorney before you change title to accounts to understand what the implications are. ![]() If you pool that by merging your account with one of your spouses into one new joint account, that may forever change the character and implications of those assets. If you have an asset that was premarital and maintained separately with no commingling of marital resources, that asset might be characterized as separate property that could be yours in the event of a divorce. While you might not love that idea, if you are going to pool, address it in a comprehensive and realistic way as appropriate for you.īefore you pool any of your finances find out the implications of what that might mean to the characterization of the assets involved for matrimonial purposes. If you’re going to pool your finances the thought of meeting with matrimonial counsel, or even more likely two matrimonial attorneys as you will each require your own attorney, to work out what some might view as a costly and an unpleasant agreement, won’t be appealing. And the suggestion of handling this in a more comprehensive and safer way won’t be appreciated by many. Many people will be enticed by the simplicity of pooling finances, and perhaps the social presumption that couples should pool their finances. It’s kind of like the old riddle “What is easy to get into, and hard to get out of? Trouble.” So, if you engage your financial adviser in a discussion about their recommendation about pooling for psychological or other reasons, spend just as much time discussing unwinding those arrangements. It might be easy to pool your assets, but a costly nightmare to “un-pool” them if stuff happens. This article will take a broader, and more comprehensive look at this common presumption that couples should merge or pool their assets. No doubt, many readers will inappropriately extrapolate from that unique fact pattern to themselves. Because of that, the advice given to them would be too simplistic and often at odds with good estate planning that many other people should consider. Both spouses also had jobs that were low or no risk so liability concerns were limited (although out of precaution everyone should likely do some asset protection planning). Their wealth level appeared to be about $500,000, well below the threshold of any estate tax considerations. The couple had been together 15 years before getting advice to merge assets, and they had no children from prior relationships or their current relationship. But the couple being addressed had very specific facts that are not an appropriate touchstone for many others. ![]() The advice given might have been appropriate for the particular couple involved in the story. There was a recent column in the financial press with financial advisers commenting on whether couples should pool their finances. ![]()
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