After a long wait, it’s finally legal to do what your hearts have been hankering after for a long time. But as with any marriage, same sex couples will be held to legal responsibilities that the sway of powerful emotions may cloud in the run up to the festivities. Love, passion and exuberance have a way of diminishing the import of the letter of the law when it comes to matrimony.
In the next couple of weeks I’d like to shed some light on the key areas that future spouses are often inadequately informed about. While a lot of this is applicable for heterosexual couples as well, the restrictions same sex couples faced in the past may make them particularly susceptible to the downside of some of marital law.
Let’s start with Earned income:
I am always surprised when I meet with potential divorcing clients, who, after 10 or 15 years of marriage, never knew their earnings became a joint asset once they got married. Most of us get married for non-legal reasons (the whole love, passion, exuberance thing). That’s how we can enter into a legal contract without knowing about Earned Income and the huge impact it can have on our finances.
New Mexico is a community property state
Which means that when spouses get married, they legally become an economic unit. The theory is that spouses contribute labor and effort in the relationship and should share equally in their fruits. In our state, when you sign that marriage certificate, your earned income becomes a marital (or community, as the law refers to it) asset. Earned income can be used for daily living expenses or, if you’re making enough money, can go into retirement accounts, savings accounts or other assets after the living expenses are paid. Any asset you acquire with earned income becomes a joint asset which will be equally divided if you divorce.
Why does this particularly impact same sex couples?
Because same sex couples were not allowed to get married, you often made alternative financial arrangements. You are also more likely to bring a house or a retirement plan into a marriage. Assets acquired prior to marriage remain your separate property, but things can get complicated if once you’re married you use your earned income to contribute to a separate asset. Take, for example, a retirement plan that had a $100,000 balance on your wedding day. Afterwards, you go on contributing part of your paycheck to your retirement plan, only now, you are creating a community interest in your separate property! Same with a house. If you use earned income to pay down a mortgage on a separate house, you are potentially creating a community lien on that separate asset.
There’s only one really safe way around all of the complications: a good premarital agreement.