Common law marriages are not recognized in Illinois. If you've been living with someone for a long time, here are some powerful financial reasons to get officially married.
If you are married, you can roll your deceased partners IRA over to your own IRA and delay required taxable distributions until you are age 70 ½. If you are not married, you will have to transfer your deceased partners IRA to the less tax favorable inherited IRA, where you have forced taxable distributions immediately which can cost a lot more in taxes.
If you are married, federal law requires that your spouse’s monthly pension benefit must be set up where at least 50% or more of it continues to you for the rest of your life should your spouse pass away. If you are not married, and your partner passes away, you get nothing.
When it comes to Social Security, if you are married and your spouse passes away, you get 100% of their Social Security benefit if it's larger than your own. If you are not married, you can only take your own benefit, even if it's a lot smaller.
If you are married and have no earned income, you are still allowed to put $5,500 into an IRA ($6,500 if you are age 50 or older) based on the earned income of your spouse. If you are not married, and not working, you cannot contribute to an IRA even if your partner has earned income.
Finally, here’s a big reason, especially for wealthy couples, to tie the knot: a married couple has the advantages of portability which could save huge amounts in death tax.
Portability allows a wealthy married couple to combine their $5,490,000 death tax exemptions into one $10,980,000 death tax exemption.
For example, say Michael and Margaret are married and Michael dies without using any of his death tax exemption. His $5,490,000 death tax exemption, through portability, can be transferred to Margaret, which would double her death tax exemption to $10,980,000. Under current tax law, if Margaret then dies, up to $10,980,000 of her estate could be passed on to her heirs without any federal death tax.
If they were not married, Michael's unused portion of his exemption, which in this example is $5,490,000, could not transfer to Margaret and it would be wasted. At Margaret’s death, if her estate was large enough, this could potentially cost her heirs as much as $1,796,000 in death tax just because the couple was not married.
Remember that old song by the Fifth Dimension, "Am I ever going to hear my wedding bells?" If these financial reasons for marriage are important to you, then the answer to this question in the song is a resounding yes.
Each person’s situation is unique. The examples are hypothetical. The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.