Financial Considerations for Unmarried Couples

Will Hendricks and Jay Halverson, Estate & Business Planning Specialists, First Republic Private Wealth Management
April 28, 2023

  • Financial implications play a role in deciding whether to marry for many couples.
  • Marriage can be seen as a tax bonus or a penalty depending on each situation.
  • Getting married – or not – impacts your income taxes, social security, debt and more.

A growing number of Americans are choosing cohabitation over marriage, and the trend is particularly pronounced among older couples. According to the most recently published U.S. Census Bureau statistic, the number of unmarried couples over age 50 is more than doubled from 1.2 million in 2000 to 2.7 million in 2010.

Why are so many people choosing not to marry — or remarry, as it may be?

Today, the decision is less dictated by societal expectations than it was before; many Americans now base their decision to tie the knot at least partly on the financial implications of marriage, which can be significant. It is an especially large factor for older couples who have accumulated wealth and for whom raising kids together is no longer a prime concern. 

So, what are the financial implications of marriage? Here are a number of implications worth knowing about:

Marriage bonus – or penalty

Spouses must file their income taxes as either married filing jointly or married filing separately beginning in the year in which they were married, regardless of when the marriage occurred during the calendar year. This may work for or against their total tax bill. For couples who have a significant disparity in income—particularly when one spouse does not work outside of the home—filing jointly may reduce their overall tax liability because of the much wider income tax brackets for married individuals. Conversely, couples with similar earnings may find their combined incomes stacked pushing them into a higher tax bracket creating a much greater tax bill than they would have paid filing separately. 

Home sale gain exclusion rules

When selling a principal residence, a single taxpayer may be able to exclude the first $250,000 of capital gain from tax. This amount is doubled for married couples filing jointly. The $500,000 exclusion is available regardless of how much each spouse contributed to the property’s purchase and which spouse holds legal title. To qualify for the $500,000 exclusion, one spouse must have owned the home as a principal residence and both spouses must have occupied the home as a principal residence for two years out of the five years immediately prior to the sale. These two time periods do not have to run concurrently. Generally, the exclusion is available once every two years. 

Social Security

Married couples have an advantage when it comes to Social Security benefits. Spouses are eligible for the higher of either his or her own retirement benefit or 50% of his/her spouse’s benefit when filing for benefits at Full Retirement Age (FRA). There is however a reduction if the spouse claims a benefit before FRA. This benefit could be especially significant to nonworking spouses or those with limited or lesser-wage work histories who otherwise do not qualify for a benefit or would only qualify for a significantly reduced benefit amount. Under the new ‘deemed filing’ rules, when you apply for either a retirement or a spousal benefit, it is as though you applied for both and are eligible for the higher of the two benefit amounts. Also, in case you were born prior to 1/2/1954, you may be able to file a restricted application for a spousal benefit only at your FRA while delaying your own retirement benefit as late as age 70 in order to earn delayed retirement credits of as much as 8% a year. If eligible, this strategy allows for a stream of income between ages 66 to 70 while increasing your own retirement benefit amount at 70. Additionally, when one spouse dies, the surviving spouse can take the higher of the two income benefit amounts.

Qualified retirement plans

Spouses have more distribution options and protections than non-spouses in qualified retirement plans.

The Secure Act 2.0 was signed into the Consolidated Appropriations Act of 2023 on December 29, 2022. The Required Minimum Distribution (RMD) age increased to age 73 (for those born between 1951 to 1959) and further increased to 75 (for those born in 1960 or later) starting in 2033. By delaying the start of RMD, individuals may be able to take advantage of additional years of tax-deferred growth before they are required to start taking RMDs. If one spouse has a significantly large retirement account, the increased RMD age can help delay withdrawals from the account and potentially reduce the tax impact of the withdrawals. Also, the Secure Act 2.0 has a special rule for the surviving spouse beneficiaries. Starting in 2024, surviving spouse beneficiaries. Starting in 2024, surviving spouse beneficiaries of retirement accounts will have the option to elect a special rule for RMD purposes, which allows them to be treated as if they were the participants. This means that surviving spouses will be able to delay taking RMDs until the age when the deceased spouses would have been required to take them. This can be benefit for surviving spouses, particularly if they are older than the deceased spouses.

For defined-benefit plans, federal law requires that a joint and survivor annuity – ensuring the surviving spouse receives no less than 50 percent of the amount of the annuity paid during the participant’s life – is the only payout option offered unless the plan participant and spouse provide written consent to another form of payment. Furthermore, in all qualified retirement plans, the plan participant’s spouse must sign a waiver before a non-spousal primary beneficiary can be named.

Unlimited marital deduction

The unlimited marital deduction allows U.S. citizen spouses to give an unrestricted amount of assets to each other during life or at death without incurring estate or gift taxes. Unlike the $7,000 annual gift exclusion amount and the approximately $12.92 million lifetime exclusion amount (as of 2023), there is no limitation on the frequency or amount of assets U.S. citizen spouses can transfer to each other. This allows federal estate taxes to be deferred until the death of the surviving spouse.  This deferral can be quite valuable and provides a second step-up in the basis for income taxes at the death of the surviving spouse. For non-citizen spouses, the marital deduction, for gifts is limited to an annual exclusion of $175,000 for 2023.


At the federal level, surviving spouses have the ability to claim any or all of a deceased spouse’s unused exemption. This exemption amount can then be applied to his or her own estate tax liability. This “portability” of a spouse’s unused exemption may be a simple and effective way for a married couple to reduce estate taxes. However, portability is not automatic. In order to qualify for portability, Revenue Procedure 2022 -32 provides a simplified approach for eligible estates to requires an extension to file a return and elect portability of the deceased spousal unused exclusion (DSUE) amount. This extension can be requested up to the fifth anniversary of the decedent’s death. Generally, there are no estate tax portability provisions under state laws, except for Maryland and Hawaii. The estate tax exemption amounts are $5 million and $5.49 million per person for Maryland and Hawaii, respectively.


How much liability a spouse has for debts incurred during the marriage varies by state. In community-property states such as California, each spouse is fully responsible for all debts created during the marriage, regardless of who incurred them. In common-law states, such as New York, the spouse who incurred the debt usually bears the liability alone unless the debt was for necessities of life, such as food and shelter. In other words, marrying someone with bad credit could be detrimental to the borrowing power of a partner with good credit.

Medical expenses

Soaring medical and long-term care costs have also made marriage less attractive to many older couples, since those types of debt are often considered the responsibility of both spouses. Being married might also compromise the eligibility of an ailing partner for Medicaid benefits if the healthy partner has adequate assets. New York and Florida are currently the only states that permit spousal refusal, which is a Medicaid strategy that may allow the spouse in need of care to qualify for Medicaid coverage, even if the couple's combined income and assets are above the eligibility thresholds.

Loss of benefits

Remarriage can trigger the loss of certain benefits. If a surviving spouse who is eligible for Social Security benefits from a deceased spouse remarries before age 60, the spousal survivor benefit is forfeited. Alimony from a previous marriage and pension benefits may also be forfeited upon remarriage. Some military benefits, including pension income, access to health benefits, and base commissary privileges, may also be lost.

Determining whether marriage is the right financial decision can be complex. Your First Republic wealth advisor can help you evaluate the impact of getting married would have on your long-term financial security and goals.

The strategies mentioned in this article may have tax and legal consequences; therefore, you should consult your own attorneys and/or tax advisors to understand the tax and legal consequences of any strategies mentioned in this document.

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